Right Horizons Blog

Volatility in Global Forex Markets

2008-02-23T14:05:00.006+05:30

In the converging global economy, volatility has spread its tentacles beyond the equity markets to the Forex markets. Sophisticated forex market investors stumbled upon the fact of global volatility that got re-linked to various global factors like cross-country fund flows, exim trades, inflation rates, interest rates, industrial production growth rates and other socio-geographic factors that bear down forex co-movements.

Initially, the forex rate volatility was better contained within the G-3 economies-US, Japan and Germany, but later extended to G-10 countries whose currencies are traded most in the international exchanges. Exchange rate volatility not only affects the profit-seeking behaviors of currency traders, it also bows down on the productivity and profit margins of manufacturing enterprises that depend on export revenues. The macro-economic effects thus have far outreached in order to call in for monetary policy objectives from the regulators to extend support to those affected, in terms of export sops and duty cuts.

(Click Image)

It has been implicated that a sound domestic macroeconomic and monetary policy could diminish exchange rate volatility. However, market factors and capital flow dynamics drive exchange rate movements that may not be compromised in certain situations. Some of the recent forex misalignments are due to increased capital flow dynamics into the emerging markets and out of the developed markets, and fund flow thus triggers some factors of dynamic forex movements. $/¥ and $/€ have caught the glimpse of investors who foresee major gains in future spot prices and by also formulating the famous ‘carry trade’, where one borrow cheap (Japan) and invest in higher dollar ($) yielding assets.

The above chart depicts the forex movements of six countries tracking for a period of six months, from August 2007 till December end. Many questions remain unanswered and have become topics of great interest as to whether continued depreciation, as that happened in the case during the Asian Financial crisis 1997 leads to evolution of financial crisis, effect of exchange rate volatility on the economy, or does economic shocks always leads to a recession?

Sandy Chatterjee, Analyst
Right Horizons Research Desk

The Next Big Thing In the Market: e-Paper and e-books

2008-02-22T12:41:00.007+05:30

How about going to a beach enjoying the sun and the breeze with a virtual paper that downloads news data, novels or even articles via wireless network, yet small 'n flexible enough to fit into one's pocket?
It is there already in the markets thanks due to some miraculous breakthroughs in digital vision technology! PVI technologies and others like Sony are out in the market with the first of its kind- 'e-paper' or electronic paper based on active matrix display technology utilizing electrophoretic crystals or organic polymers (OLED) that is paper thin and could be read just as a newspaper. The concept is based on flexible e-paper display that produces bi-stable images with paper-like 180' degree glare free readability.

Bi-stable, meaning a device that draws power only if the image is refreshed, as opposed to the backlighting facility employed in LCD panels. Handheld e-reading devices have metamorphosed and evolved rapidly in the last decade from the first PDA's to the current e-papers. Organic light emmitting diode crystals are used to create full feature motion videos, high graphics-enable images with good resolution even under sunlight. These cousins of PDAs are both light, durable, unbreakable enabling digitization of conventional books.

E-paper can be used to read pages just like any other book, but without turning pages, with with future battery capabilities, each could survive about 7000 pages of readebility per charge. The technology behind e-paper is quite interesting and dates back to 1960's when Xerox took the first initiative to develope innovative display devices.

Technology Behind E-Paper:

Usually, electronic paper has two parts-electronic ink as a 'first plane' and ICs used to create patterns of texts and images as a 'backplane'. The older theory worked on the concept of ‘electro capillarity’ that works by moving colored liquids against a white background. Later, the term was changed to 'Electro wetting' as a widely applied theme. Organic TFT technology is implicated in this new version. E-paper structurally consists of thin sheets of plastic beads encapsulated in pockets of oil that are able to rotate freely within the plastic sheet when electricity is passed between them. In-turn, each hemispheres of a bead (ball) have a different color and charge assigned to them. When electric fields are applied by the backplane, beads rotate creating a two-colored pattern. Aggregations of thousands of similar beads are used to create simple texts or images based on electrical fields applied.

The limitations of these bi-chromal frontplane were that it lacked colors. As a result, electrophorectic front plane were developed to display multi-color texts and images. Millions of microcapsules of 100 microns (diameter of human hair) each filled with clear fluid (+ve white, and -ve black)were placed on the front plane and electric fields applied. When -ve field is applied, +ve white particles moved up to the top of the microcapsules appearing as white dots, while black particles settling down to remain hidden from view. Again, when +ve field is applied, black particles migrate upward to the top while white particles move to the bottom thus generating black text or picture. This same technology was somewhat modified to include colored crystals as Cholesteric Liquid Crystals (ChLCD), some spiral shaped liquid crystal molecules that can change orientations from horizontal to vertical positions and vice versa to produce multicolored effects when electricity is applied.

E-paper has a wide potential aplications within various domains for example, someday, we would be delivered e-newspapers instead of the one we have now, or e-displays and hoards up on the sky, or just wearable display screens on the front-back of our trousers or so! The Financial opportunity is huge considering the easiness and wide acceptability within the consumers domain.Commpanies like PVI, Taiwan, Sony, IBM, Phillips, Toshiba and Fuzitshu has already jumped into the business of Electronic paper R&D and marketability.

Sources: http://www.tfot.info/articles/1000/the-future-of-electronic-paper.html
http://64.202.120.86/upload/image/articles/2007/the-future-of-electronic-paper/cholesteric-liquid-crystal-.jpg
http://www.pvi.com.tw/index_en.php
Sandy Chatterjee, Analyst
Right Horizons Research Desk

2008-02-22T11:46:00.002+05:30

Pig shortage in China powers inflation -Telegraph .co.uk

By Mark Kleinman, in Hong Kong

A shortage of pigs and rising feed costs helped China's inflation index to its highest rate in more than a decade last month, raising the prospect of further interest rate hikes in the final quarter of the year.

Fore more, Read...

As previously last year we presented the acute food and pig shortages in China propelling the inflation level to a decade high, it seems that Beijing is fast exporting its inflation level outside China.

Read Our Analysis.....

Right Horizons Desk.

Dynamicity of the Capital Markets: Miracle Economies, Business Cycles and Others

2008-02-21T16:24:00.005+05:30

Investment Boom and Bust Cycles: The same old story!

On the backdrop of a robust economic growth driven by China and India’s powerful driving engine, Asia seems to have been the perfect ground boasting competitive yet broader economic reforms and thus have entered the phase of miracle economy. There have been an increased participation of foreign capitals as ‘private equity’ as well as from hedge funds who have brought in huge inflows into these markets. According to a recent IMF estimation, global growth have been forecasted around 4.8%-- from a 5.2% forecats earlier, and now down to 4.1% due to the ensuing slowdown in the US economy and the problems in the US housing markets.

The euro zone, with its 13 member nations are predicted to expand by 2.1% while the US could expand by only 1.9% instead of 2.8%. Where else, the Asian region is expected to grow by 6-6.5% on average taken for major Asian economies , i.e., China, India, Hong Kong, Taiwan, Korea, Thailand, Malaysia and Singapore.

The financial market turmoil has left the markets highly volatile and somewhat unstable. With the ‘Greenbacks’-(US $), further depreciating against the major currencies, particularly the euro, a rising euro and the Yuan pressure has caused a substantial widening of the US current account deficit to-6% of its GDP, above a 4% comfort zone.

Much of the causes of US current account deficit have been blamed on China due to its undervalued Yuan, which the country enjoy as an export incentive over other countries. China has recently increased its forex reserve to well above US $ 1 trillion, which resulted in trade
shortfall for the US.

Is the Dollar still dominating?

The US dollar’s dominant role as an international reserve currency seems to have been heading for a flack, as euro has recently emerged as a currency of choice among the forex markets due to its strong holding against the $. The Yuan (renminbi), has also gained critical importance due to its sustained pressure on the $ markets, the chief cause for calling China to revaluate its currency.

The euro appreciation, on the other hand has increased concern for the euro zone exporters, as exports have become costly relative to China, which means cheaper imports for the Chinese goods to the European markets and vice-versa. It is to be seen whether cheaper imports could contain the inflationary pressures in Europe, as well as a low interest rate scenario be possible in the near future. But the Yuan seems to have cast its spell on the euro zone besides the US, as such; one is likely to see if there could be any substantial trade deficits to follow from these regions too. Recent account points to this trade deficit as being 25% amounting to US $88 billion for the euro zone.

G-7 Summit and the Weforum 2008 On Global Economics and the Financial Markets

The G-7 Summit and the Weforum 2007 concentrated mainly on some of the problems and policy changes in the international capital markets. Among those were:

Soaring value of the euro
How to contain financial market turmoil
China’s revaluation of its Yuan (Renminbe)
China’s mounting trade surpluses
Yen appreciation and containing Japan’s deflationary phase
Risks in the international financial markets
Bank and financial institutions exposures to the current sub prime mortgage market collapse
How to contain further US $ depreciation
International Foreign exchange market stabilityCrude oil price shock and its global impact

How Much Strong is the US Dollar?

One would wonder about the US strong dollar policy adopted by the federal treasury behind the dollar’s debacle in the global forex markets, as a falling dollar may not sound favorable to the monetary policy makers. These factors, combined with undervalued Yuan have already disrupted the global exchange rate management as some countries are finding it difficult to remain pegged to US dollar. We have noticed some major currencies appreciate against the ($) dollar, such as Yen (¥), Indian Rupee, Euro (€) and the Thai Baht, by at least 7-10%, except the Chinese Yuan (renminbi) which moved only 0.75% in the past six months. One of the causes behind the falling dollar is diminishing importance of the ‘Greenback’ due to shifting of investors target toward the high growth emerging markets, Asia-Pacific, where the global investors see potentially higher return on investments (RoI) compared to the US markets/assets.

Some Concern For India and South East Asia: Inflation, Market and Currency Volatility!

On the Indian perspective, though the country has been doing perfectly well in containing inflation well under 4% as well as managing capital inflows, recent rise in peak crude oil price touching $100/brl brought-in inflationary pressures within the RBI horizon. RBI’s weekly statistical supplement (WSS) reported that India’s forex reserve jumped from $256.7 billion till 20th October to $287 bn in January 2008 . India has also gained a fair share of the global forex turnover with around $34 billion on average turnover on daily basis —that’s 0.9 % of the total share. Singapore and Hong Kong are the leaders in Asia (ex-Japan), with each about $231 and $175 billion, that’s 5.8% for Singapore and 4.4% for Hong Kong respectively. This naturally shows how the strength of the Indian capital and the growing 'Forex' market is gaining continuous momentum from overseas investors and FII.

The data released by Bloomberg points out to the fact that India, along with China are absorbing foreign funds more quickly than the rest of the Asian countries. The Bloomberg report also notes that the investor activity of private equities and hedge funds have increased considerably till last year in the Asia-Pacific region due to prevailing strong Asian currencies, low volatility and less risk aversion. But the exported credit market crisis from the USA changed the scenario somewhat equally replaced by high uncertainty and volatility. Truly, the dynamicity of the Asian capital and the equity markets has increased beyond expectation with new emerging economies like Vietnam, Thailand, Malaysia and Indonesia contributing to the economic successes within this turbulent times.

Sources: Bloomberg.com, Thompson, Moneymorning, FEER, FT and Economic Times

Sandy Chatterjee, Analyst

Right Horizons' Research Desk.

Oil Price Moderation: When will that happen?

2008-02-20T10:36:00.004+05:30

The Asian markets continued the downtrend on the event of the crude oil crossing the $100 per barrel mark for the first time in 2008. Markets weighted heavily on the current uncertainties and volatilities involving crude oil prices. Even on the backdrop of an US recession when analysts predicted the easing of off crude oil prices due to a potential low demand from the US, oil seems ride high on the financial streets with no sign of moderation.

Is Global Recession to Ease Oil Demand?

Demand pressures on oil prices are here to stay and there is a little chance of oil price moderation which is still trading above $95/brl. And, with higher oil prices on the horizon, upside risk to inflation forecast in US and emerging markets would weigh down on Fed policies and interest rates which the markets expect to ease the ongoing credit squeeze. Funding constraints of ongoing projects due to a recession could well affect crude oil prices and production demand easing in the world’s largest economy, the US. China, being the third biggest importer and the largest exporter could feel the pinch if export demand comes down the line. But is it also expected that a strong emerging markets growth in investment and consumption is likely to keep up the demand for oil and petroleum-products in 2008.

Petroleum (Oil) Sector Outlook:

Oil Exploration, Production and Output: Demand vs. Supply Story “It is estimated that the world liquid fuel consumption will increase from 83mn barrels per day in 2004 to 97mn barrels/pd 118mn barrels/pd in 2030”. (IEO Report). World crude oil prices are estimated to fluctuate between $38 on the lowest and $157 on the highest, according to IEO estimates. By 2030, OPEC is expected to produce 57mn barrels per day as against non-OPEC countries that would be producing around 61mn barrels/pd. In 2004, OPEC produced some 41% of global oil, below its high of 53% in 1973.

A price shift for crude oil is on the line but one is to notice whether it will be a demand induced or supply driven. As of January 1, 2007, proved world oil reserves, as reported by IEO, were estimated at 1,317 billion barrels. With this ever expanding demand and supply constraints in the global petrochemical industry, China, India and other Asian countries shed a strong outlook for the coming 2-3 years despite a threat of impending US recession. The global petroleum
industry is valued around $ 3.4 trilllion, with an annual growth rate of 4%. BRICS nations are poised to play a dominant role in global expansion of the refining industry due to increase in demand from the related client industries.

Capacity expansion of petrochemical plants and new investments for exploration and production projects are to keep the spirit of the petro- energy sector in both China and other countries. Global giants like Chevron, ConocoPhilips, CNPC, Shell, BP, Exxon and others have taken initiatives for further expansion of oil and gas pipeline network, thus providing a strong outlook for the petroleum producing countries.

Sources: IEO, Bloomberg, FT
Right Horizons' Research Desk

Banks under Economic and Financial Stress:

2008-02-16T15:44:00.005+05:30

Global Risk Scenarios:

The trends entailing the recent emerging markets outlook on the back-drop of an US economic slowdown could have substantial impact

on the growth sustenance of fast moving sectors like IT , Financial and banking in countries like China and India, as discussed in the recently concluded weforum in Davos, Switzerland. Many issues were discussed regarding economic growth, financial market turmoil, banking risks, climate change, exchange rate risk, International Trade, etc. The IMF in its recent speech has trimmed the world economic growth rate this year to less than 4 %( 3.9%), from a 4.5% forecast earlier.

Housing market slowdown in the US could trigger an widespread financial crisis if not well contained, a well-discussed topic in Davos, while the 'Team Bernanke' , and other Central Banks acting as a lender of last resort to prevent contagious defaults, has put on every effort to contain the crisis by following market trends and financial strains of the banking and financial sectors, did well to respond promptly by cutting Fed interest rates along with liquidity infusion subsequently to ease the credit market seizures. Several banks like Citi Bank, Merrill and other have seen erosion of their banking capitals due to disproportionate capital write-downs of more than $ 11 billion, related to their subprime ABS exposures. The figure on the top left shows the total asset backed securities outstanding for each category like credit cards, home equity etc., for the year 2006 and more to follow in 2007-08.

Banking risks, Capitalization and Inefficiency: Where they stand?

Regulators have recently taken up the initiative to scrutinize and scan the banking operations and the rating agencies that grade credit-enhanced papers as tradable asset backed securities. Regulators may consider the compensation structures of banks that take too much risk in the market. Banking restructuring in the line of Three pillars of Basel II have also been revisited as banking risks on the event of a financial crisis are considered up as top priority. As one might ask, what are the risks that banks face in these scenarios?

Banking systems have different risk scenarios. For example, beside Systemic risks, they are prone to Economic risks like;

Interest rate shocks
Forex movements
Loan loss (credit risks and credit obligations)
Stock price movements
Run-on-the bank due to contagious effect

Others risk factors like operational risks, information risk (proprietary info about financial engineering, confidential client data loss risk), default risk, inter-bank and market risks, Liquidity risks (Liability risks), idiosyncratic risks and risks stemming from financial linkages between banks. Banks may also be affected by business cycle shocks that may impact on a macroeconomic scale.

Need for Speedy Regulations:

Banking regulators and supervisors are placing more stress on market risk exposures on banks, since market leverage among investors plays an important role when things go the other way. Monitoring inter-bank liabilities within the whole banking system could be a better way to study rather than isolated cases of insolvency crisis. Regulators are wary about backing inter-bank credits with equity capitals, since loss in equity capitals could hamper banks loan repayment obligations. Moreover, effects of financial and economic shocks on the banking systems are looked upon since investment banks have a higher level of risky investment portfolio than other banks.

Image Source : The Bond Market Association

Rating Unsecured Securities that Creates Crisis!

2008-02-15T10:03:00.006+05:30

Global stock markets have become volatile since last year and the emerging markets are no such exceptions. Wide fluctuations in scrip’s prices and indices across the globe have created tough times for retail investors who find it difficult to 'time the markets' properly, carrying-in some huge losses on their part. Weak technical factors weighing heavily on the markets as indices saw their benchmarks battered below their support levels leaving investors in panic.

Institutional selling on emerging markets equities continued for the sixth week unabated, and FII's are reeling under domestic redemption pressures to cough up whatever profit they could make. Investors in US and other EU countries have left out their home bias in investment strategies and sought better asset classes outside their domains in the emerging markets. It is estimated that only 5% of US investors invested in emerging market equities, though emerging market returns outperformed their home benchmarks for the last ten years or so.

Where are the Risks: US or EMs?

But with these prospective returns comes the risk of emerging markets volatility since EMs are now much integrated with the developed stock markets and events originating in the US markets are easily spilled over to the emerging markets through contagion effects. And the same did happen on the aftermath of the 'subprime fiasco' with investment banks who earlier banked on these risky mortgage backed CDOs (collateralized debt obligations) have been 'writing down' these bad debts and facing huge losses, the event bearing down substantial effect on the stock exchanges across the platform.

Investors are up-in-arms with the rating agencies that grade securities and critics have called in for stricter regulatory norms and limiting roles of these rating agencies in pricing certain risky bonds and securities. The bull market run has been, according to some analysts, spoiled by the subprime debacle since it started defaulting in the US, and the following market volatility took over as news about mortgage defaults that have become the centre of this whole mess. It has been further reviewed that nearly $450 billion of bad debts are to be written-off this year, most of these by many big international investment banks.

Consumers in debt, Economies in strain

2008-02-04T12:59:00.001+05:30

Critical issues in global financial markets and the overall macroeconomics have been discussed in the ongoing WEFORUM in Davos, this year. Top policy makers and experts gathered at the forum to find solutions for the ailing US economy which is into a major recession since the housing trouble propped up last August, 2007. The Federal Reserve is trying its best to avert a major slowdown in the US economy by large cuts in short-term interest rates periodically, only to boost business and consumer confidence.

Knowing the potential impact of US recession on the global economy, particularly the major export dependent countries like China, India, Thailand, Japan and others, Fed's policy response are targeted to buffer the global economies in the event that the economy does not face a severe credit crunch. Severely stressed banking system in the US are prone to capital squeeze as the mortgage crisis revealed some major investment banks like Citi and Merrill Lynch 'writing off' subprime defaults from their balance sheets and downgrading value of assets.

Inflation Issue in Emerging Economies:

Issues revolving around high crude oil prices and inflationary threats of higher commodity prices have been the topics for much debate. Also, analysis of a threat to Chinese growth in the light of a global recession and ongoing inflationary pressure across the emerging markets are looked into. Managing food inflation in China, which rose to 9.1%, and in Vietnam-9% remains some challenging issues for Beijing and Hanoi? According to Bloomberg, consumer confidence in the US are down somewhat and unemployment rate hit the decade high 0f 6%. With recession shadowing on the streets, corporate sectors are worried about a possible impact on their profits.

How China can drive up Inflation globally?

It has been assumed by some analysts that, China might be exporting inflation outside and pass off the higher export costs onto the consumers, due to rising manufacturing costs, high food prices and higher attrition levels in China. With an ever increasing demand of commodities and fuels from China, raw commodity prices have started increasing substantially and meeting the demand seems to be the key factor presently. Companies are passing off this higher cost of production to the consumers, and the resultant increase in Chinese export prices could propel inflation further outside its domain.

A look into financing the US consumption:

US is still financing its consumption by credit, while savings are negative. It may be the likely option for US consumers whether to finance their consumption through credit or by income, since this would make the situation still worst. The Bush administration have considered lowering taxes to boost investments and cutting down government spending, but a recent announcement by Bush administration signalled a US$3 trillion spending plan, that may further deteriorate US budged deficit.( Yahoo news)

The Housing Trouble:

With falling housing prices and oversupply of homes and condos, commercial and residential property outlook face a grim situation. ‘Subprime fiasco' has resulted in increased defaults on US high-yield bonds and banks who have invested in these junks are facing the fire. The situation has be summed up somewhat like this:

"Homeowners defaulting on ARM repayment schedules (amortization), selling their remaining home equities, causing oversupply of houses and condos, falling demand in property and asset prices, slowdown in residential and commercial constructions, workers being laid down, and those workers stop spending, downgrading consumption sentiment paving the path to a full blown recession", The Moneyweek (adapted).

Impact of Consumption squeeze:

The consumption squeeze by laid-off workers could have severe impact on corporate sales and profit. And compounded with falling dollar driving up import costs, Americans and Europeans both are likely to cut down their 'Chinese shopping spree', since the dual effect of higher Chinese export prices and increasing import costs might strain the purse of consumers. It is likely to be seen how the systemic effects of Fed's monetary policy easing could anaesthetize the painful economy already battered by multitude of problems.

Sources: Moneyweek.com, Bloomberg.com, weforum.com(Davos)

Right Horizons Desk

Fed Trying to Hedge a Recession through Rate Cuts: Is India Well Balanced?

2008-01-30T16:58:00.000+05:30

'The pide-piper of the bull market'

Not all is well on the western frontier. The bull has turned its back on the event of a global contagion effect that spread from the valleys of the US to the plains of this part of the world. Countries reaped the harvest and the ‘bull’ season seams to be over. The fear of a US recession looms high on the eastern horizon that depends much on the US consumer markets has cast a ‘Halloween spell’ on the evolving economies on this hemisphere. While the US economy is heading toward a recession, the Fed is trying to hedge the same by simultaneous rate cuts to ease the credit squeeze and boost the economy and corporate sentiments. In this hour, how is India affected by these macro changes? What challenges does India face in the event of a full blown recession in the US? Could India insulate against one such?

At the recently concluded summit in Davos, at the World Economic Forum 2008, Union Commerce and Industry minister Mr. Kamal Nath quoted it is really difficult for India to decouple from the US economy, though we are not likely to face the heat on the same if there is true recession. Backed-up by strong economic growth and a booming domestic market and good fundamentals which is growing by 8-9% on average, India seems to be a little far from the downside risks to its economy. It should however be kept in mind that India is less export-dependent economy than its peers China, Japan and other who are likely to face the blunt if things go wrong. Domestic fundamentals and macro-economic indicators are quite strong to face-off a downturn. India has already positioned itself as one of the largest economy with a GDP of $1 trillion and as the fourth largest consumer market in the world, behind US, Japan and China. Development on every frontier is the cornerstone of this economic sustenance that India is likely to keep up.

How is India in a better position than others?

Interest rate seems to be driving the speed of the economy in every country as investors and corporate are more inclined to take cover under the central banks’ umbrella. Looking at China, whose economy is already overheated and risks burst, Beijing is trying its best to cool its overheated economy by subsequent rate hikes, the opposite trend US and other developed countries are following. The Bank of China (BoC) hiked bank lending rates and CRR seven times last year to cool off, without much affect. It is assumed that if the interest rate hikes are too fast, bubble will burst eventually eying a slowdown. And if the economic heat is not contained, bubble will burst leading to a huge stock market crash. It seems China is facing a double situation and a tough challenge where it needs to balance the growth without dampening it. India seems to be in a much favorable position as lending rates in India are quite high and it is time for RBI to follow the Fed footsteps to cut lending rates to ensure more investments and smoothen out credit channels.

Who is Chasing the Liquidity?

A question comes to our mind; is there too much liquidity chasing China, and somewhat less in India? Not really. According to EPFR, which tracks emerging market fund flow, India is still and likely to be the top destination for global investors, though FII's pulled out nearly $10.8bn from the EMs, money is going flow back once the valuations comes clear. It’s no doubt that India’s economy is overheated too, well destined to do best and but inflation indicators is well contained also. WPI is 5.38%, but with rising crude oil price is a cause of major inflationary pressure on the economy, and India likely to tide about the same. India also have a good savings rate, 32% one of the highest among the emerging markets, compared to negative savings rate in US and much less in China. Some part of this disposable income will eventually flow to the domestic markets either as investments or consumer spending. That makes sense there is no credit problem in India, in-fact, there is increase in credit demand according to RBI statistics.

India also do not have a subprime lending sector like the one in US that spelled trouble due to lax and easy lending procedures creating a housing bubble that burst in 2007 along with the ABS markets, engorging trouble for the global credit markets. Lending procedures are much stringent in India and as such, we are not going to face such a ‘prime’ trouble in our economy. But banks and financial institution, along with the RBI should be more careful about lending reforms and the interest rate, as low interest will boost borrowing in the real estate sector though the cost of borrowing will come down for the corporate sector.

It comes to one’s mind, what have they learned and how they have reacted to the financial downtrends that swept the globe. In the same breath, ironically, the economies and investment theories holed ground instantaneously once the markets crashed. The economic sustenance though, may not depend solely on the market performances, but they are closely linked to the overall health of the economy. And when the policies, ideas and implications go wrong, every economy has to pay a heavy burden on their growth fundamentals.

US Spending too much while saving none! Where is the balance?

Overspending that resulted people in the US end up in debt is neither acceptable, since it brings down inherent risks of being in debt. Today, an average American has more debt outstanding than what he is able to pay back, and most even have 12-13 credit obligations pending. And the US Fed ‘fed’ their appetites with more cheap credits with virtually no underwritings!

Conversely, Indians are more realistic when it comes to savings and spending. They usually save more than what they spend, and thus the Indian savings rate of 32% are among the highest in the emerging nations. China has a much less savings and US the least. In fact, US have negative savings rate that buried down for their being too much consumptive nature. Too much savings cut down spending and bring down consumption level, which may be detrimental for the economy. Low spending decreases expected revenues from sales and lowered sales make business to cut back production which decreases the total income earned by economy.

India is trying to push spending to boost the economy, but they tend to be more careful in maintaining the balance between savings and spending. Interest rate do affect the savings propensity as a very low interest rate as in Japan (0.50%) discourage savings as bank deposits on fixed-income instruments yield very low.

Dollar still falling;

The US assets have lost much of their shine. And with it, the $ followed the trend. The reigning dollar, though down but not out, eagerly waits to see if any (Euro or Yuan) that could replace it, holding more intrinsic value, to be fed by global demand.

Where is the Fiscal Prudence For US?

While the IMF went preaching to developing countries about fiscal prudence, it missed giving the same advice to the US Government. At hindsight, the pressure IMF put on the Indian Economy helped us pull up our socks and kept us conscious about Fiscal Prudence.

Trade Mismatch-Where and When it went wrong?

US is also facing a huge balance of payments crisis and trade deficits with virtually every emerging nations. US has been continuously running a trade deficit with China from 1985 onwards and the same deficit hit a record high of 763.6 billion US$ dollars in 2006, up from 716.7 billion in 2006.This might create a long-term problem for the US economy and this can already be seen with the depreciation in the $ (dollar). Continuing focus on spending without keeping a check on the Fiscal Deficit would create greater problems for the US economy in the future as they are likely to learn.

Happy Lending: Need to Pay-back?

Lending without financial underwritings played off heavily for the lender, mortgage lenders and financial institutions in the US. The Subprime lending category to less creditworthy borrowers led to the mortgage crisis when borrowers started defaulting on their loans when the interest rate adjusted. The loans were given on I/O and ARM basis that asked for very little credential and collaterals to hold against those loans. These ‘happy lending’ turned out to be soar when things went wrong.

Sometimes, Traditional Reforms Helps!

India, being more conservative on lending practices, have strict norms on commercial and personal borrowings, as thus would not face a situation like one in US. Hence, India will not be impacted in a major way. That said, the Central Banks and RBI are in close monitor to ascertain the credit demand, market liquidity, Inflation and interest rates, and the lending reforms that suits India's demand, and not to let go the things right out of the hand that fuelled subprime debacle in the US.

Right Horizons Research Desk

The Anatomy of the market crash!

2008-01-24T17:27:00.000+05:30

"Fed has given cover again."

Well, it was anticipated. Ben Bernanke did his best! But US is still on the 'Recession line': Markets falling heavily. The causes ? Manifold:

Fed's emergency surprised rate cut to cool the crying market was both welcomed yet remains an issue of much debate. It's like bailing out the troubled one's each time they got into one. But how long can the Fed really cushion the crumbling economy that foretells recession every moment? Asian markets were never immune to any such downturns neither did it decouple with the US economy. If there are others factors that triggered the crash and one needs to 'cut' deep into the grave to find the stones that turned the great wall of the Bull.

So what triggered market crash in India? Was it only a subprime? It's true that markets have re-coupled in recent times rather than decoupling-and economies have become much more bonded together. If subprime fall-out was there in US, unwinding of high-leveraged positions and clients failing to meet the margin calls proved to be a catalyst in the market fall in India. And there were those cunning FII's that actually started the sell-off. Well, it’s not the FII's fault nor are they running some charities here. They are to book some profits on their investments and that's all. It's also important to note that how a small sell-off (0.8%) of the total FII investments could trigger a huge crash the ones' we noticed on January 21 and 22nd.

BSE Sensex almost lost almost 30% of its market cap , that's around Rs.75 lakh crore got wiped out of the equity markets in last few trailing sessions. Current market fall eroded investor’s wealth, health and confidence too. Retail investor's suffered most as they could not bear the magnitude of the stock market crashes. Domestic Institutional Investors like MFs, PFs, and Insurance companies may have bought some, but they could not avert the waterfall. And now it seems that those companies raising funds through IPO issues getting dampened since before the crash, many IPO's actually saw huge oversubscriptions, but it might be really difficult for them to get a few times subscriptions behest they need to wait and revise expectations on their valuations. Corporate sector usually raise funds through equities, debts, rights or a combination of all.

A big market crash usually brings with it the wind of bearish telltale, a symptom of an economic slowdown or Banking liquidity crisis, the one we experienced during the last Asian Financial Crisis of 1997. But, considering the strong fundamentals of Indian companies and equally sustained growth story, the Indian economy which has a long way to go, analysts feel long-term investors need not worry about a recession in the US to hamper India's overall growth. Recent data from the RBI show there has been a strong credit demand and good corporate performances across the sector except the software which is down by 33% from last year. Many Indian companies may not imply GAAP procedure, yet it looks like that companies and Banks in India are in better shape than their peer ones in US, since we do not have subprime loan category in our portfolio as yet.

It time to ask: Should the US decouple itself from the emerging markets to avert a major recession? But it's neither acceptable nor desired since Asian economies (exports) are very much dependent on the US: the US consumers on the 'Cheaper imports". Yet US run trade deficits with all the major Asian economies, China being the largest. The debate will continue whether Greenspan's lose monetary policy may have seeded subprime plantations when the interest rate grounded. It is to be remembered that Greenspan actually pulled out the US economy out of the dot.com burst that went havoc.

And for sure, India and other emerging economies should also learn the lessons from the events to avert a ‘prime’ crisis in near future.

Subprime Ruling the Markets! Some Correlations between Hang Seng and BSE Sensex

2008-01-22T12:08:00.000+05:30

The markets continued their worst trends in recent times when the BSE plunged again by 10% after which trade was halted for 1 hr. The stock market bloodbath continued throughout Asia-pacific markets on global financial crisis and concerns of a severe credit crunch should the Fed and other Central banks come up with rescue efforts. In BSE, 10% market wide circuit filters were applied and trading halted temporarily.

Should the market bounce from here, one could expect a rise of 1200 points or more to make up for the investors loss on two accounts of subsequent tumbling. Volatility has taken control absolutely in the markets and overvaluation in the Indian equity market paid off, similar to other emerging markets like Hang Seng(Hong Kong). Hang Seng (lost 5.5%) and BSE (lost 7%) as both saw the worst times and both were down nearly by similar points, showing how correlations took part in these markets.

Both the markets have a high market cap/GDP ratio, and anything above 100% is a sign that the particular market might be overvalued. India's BSE m-cap/GDP ratio touched 173% in Dec 2007, well above comfort zone of 100%, according to Economic Times, and the prevailing recent events have brought down the overall market capitalization to Rs. 58, 73,000. Markets like Hong Kong, Singapore have ratios well over 200%, considered to be too overvalued.

It was during the dot.com era that US markets had a ratio of more than 150%, well above its average of 50%, and the same got corrected in 2001 dot.com burst that brought down the m-cap/GDP ratio by 63%, according to Economics Times Research. So, it might be concluded that this particular ratio might have played some roles in market corrections.

In BSE, the downfall was aggravated when margin calls were triggered. There was heavy distress selling on part of some brokers to cover off the positions. According to Duetshe bank, 'liquidity shortage and oversupply of stocks in some sectors' might have been the catalytic factor, besides the US economic slowdown.

FII's and retail investors lost around 16% in BSE and liquidity crisis, panic selling and FII pullouts replaced the once calm and most profiting exchange that saw a bull run for the last 4 months. In October 2007, the market fell 10% and trading was halted due to the participatory notes effect, and in May 2006, the marked dipped by more than 10%.

It seems that BSE Sensex is having a correction every year since 2006 till present. On the three above occasions, markets plummeted by 10% causing a trading halt. It seems that the volatility has increased in recent times and international markets have become more correlated, and a chance of decoupling effect seems to be remote.

Right Horizons Desk

For More, visit .........

A Total Bloodshed in the Global Stock Markets!

2008-01-21T14:43:00.000+05:30

We are already in the very late stages of a historic bull market! The decouple story has ended as markets globally followed bit and bytes of US subprime market collapse that reverberated in the financial markets.

The markets all over the world fell on account of the subprime mortgage market collapse that trigged the near end of 5 years 'Bull Run' in the global equity markets. Financial markets today have become more consumer driven as like US, and weathering an US slowdown now remains a big challenge for the global, particularly export dependent Asian economies.

Subprime has removed the stains out of the financial markets and the color is now more visible. Valuations will tend to matter more as some markets might see near 10% or more severe corrections this year. Though the consumer growth might have shifted from US to China, but US still remains the largest consumer driven financial market.

With stock markets tumbling and Wall Street in hay day, investors are left out in dismay about the true future risk/return of equity investments outlook in 2008. Analysts are up in action to find the cue and a safe haven for the investor communities to bring back their sentiments in the financial markets. It seems that their might be some damage control to repair Wall Street from the subprime effects in the coming.

Markets Crashed on the Financial Highway!

The Hang Seng fell about 1383 points, the BSE Sensex saw a 2000 points intra-day drop, a total bloodshed in the markets with the single largest ever fall in a day. Major loss of investor's wealth (more than US$100 billion in a single day)occurred in BSE Sensex 30, the highest since it started trading nearly two decades ago. BSE Sensex closed 1408 points (8% )down to 17605.37 points. Indian investors are nearly in total shock as it has been touted as one of the worst dip in BSE's trading history. At this moment, investors might have thought of real estates as their portfolio as a better option than equities! But the odds again speak. Its' the housing market trouble in the US that has brought global investors down to their knees. The question remains, will the market go down further or the clear valuation levels are out? Are emerging markets free of an impending global credit squeeze?

Stock markets globally are also reeling under the subprime spillover effects, as most markets continued their downtrends amidst corrections (Shanghai SCI 300 saw a big fall-266 points down) after US has unofficially slipped into a recession. The world's largest economy and the Wall Street are down with bears hunting the bulls at major exchanges in Asia-Pacific, Europe, and China and in the US. The drop has been quite a dramatic in some markets like Nikkie 225 that already lost 11% in 2007, and Hang Seng, BSE Sensex among the major losers today.

Consumer driven global financial markets are under severe correction which might have been overdue. The last global financial crisis was triggered in Asia, Thailand known to be as one of the worst crisis ever to have happened in the financial markets. Asian financial crisis in 1997 was mainly confined to Asian economies, and that too, among Thailand, Singapore, Malaysia, Indonesia, Korea and Hong Kong.

Exactly after ten years on, we face a similar crisis, but this event have its root in the US. In the last decade or so, Asian economies emerged as tigers with unprecedented growth in India, China and other Asia-Pacific countries. It seems that the consumer growth has shifted its base from the US to other countries, particularly China and India, the two fastest economies in the world.

What To look For as a Safe Haven? Why not go for the Alternatives?

Oil, Energy, tangible energy resources, Gold, Alternative energy resources, investments in energy efficiency projects, Clean technologies are the options left out mostly for a risk averse and savvy investors, and some of these companies are having strong fundamentals and long term goals.

Some Options for Investors:

Power and Natural Resources
Water Usage efficiency projects
Alternative Energy Technology
Natural Resources
Agri- products
Clean & Renewable Technology
Solar panel industry
Commodities & Uranium

It should be remembered that market prices tends to be volatile to news, as investor's risk appetites have also increased in recent times. Investors too, will be more defensive rather than aggressive on account of uncertainties surrounding the subprime debacle clouting the global stock markets.

To learn more about how to invest in real uncertainty, visit righthorizons.com

Right Horizons Research Desk

Subprime after-impact:Bumpy Ride Ahead?

2008-01-19T12:00:00.000+05:30

USA has ended the year 2007 with lot of uncertainties and on a negative note. It may not have been the best of the times for investors, but the market downturns have been cushioned by an equally good year in Asia. Year 2007 has been nightmare on account of the subprime breakdown and is touted to be the worst times for US financial institutions. Though 2007 earnings for the US were variable, when the subprime blew off in the summer of ’07, markets started to tumble and take the heat on. The subprime provided a perfect catalyst for an US recession to set in with global analysts sitting with fingers crisscrossed. It has been observed that there have been a consistent slowdown in US earnings growth since 2004, though the S&P 500 forward P/E ratio remained at 17x last year. US investor sentiments have been hit hard due to the subprime spill over as housing is already under recession and home prices are slated to remain weak this year. USA is still the largest economy in the world and consumers make up about 70% of the US GDP.

Subprime has revealed that there are some better out there!

Earnings growth in US financial sector was down by about -44% in the fourth quarter of 2007. Bigger financial institutions like Citi bank and Merrill Lynch have been writing off huge subprime backed losses as did Bear Sterns and others last year. Their balance sheets look poorer on account of their risky investments that they made in subprime backed bonds and assets. Overall, the year 2008 has started on a weak note and high volatility in the equity markets. Out of this chaos, Asian emerging markets like India and China have come out as most attractive investment destinations in the regional markets in 2007-08.

It is a natural phenomenon that markets usually overreacts to news. Market price movements are also correlated to their long term fundamentals and as such, bad news spilling over the markets usually creates volatility price movements. The impact of subprime has been one such catalyst to bring in price swings in stock markets across the globe. When we track the performances of regional equity markets in 2007, it reveals that MSCI Asia ex-Japan returned 60.9% from 2003-2006, and 29% in 2007. Overall, MSCI ex-Japan returned 107.6% from 2004-07 while US S&P 500 returned 13.3% overall, and -1.6% in 2007. These shows off the potent rippling effect that subprime can spell over the global equity markets, and how investors should take a more defensive positions in equity investments.

Market Evaluation after Subprime Fall-out:

Europe remains the cheap out of most equity markets with a P/E ratio of 15x. ECB(European Central Bank) forecast a GDP growth of 2% in 2008 as a cautious note to a possible subprime impact and US recession in 2008. The headline Inflation returned to 2.5% and there are certain possibilities that the Euro zone could face the heat of subprime and the cold of US meltdown. Challenges in Euro zone are mainly due to € appreciation (strengthening of euro) causing exports to become more expensive. Another factor is the rising food and oil prices putting up inflationary pressures on the Euro zone economies.

Moving to the mid-east, lower production by the OPEC, strong demand from India and China combined with supply constraint has pushed the price of oil higher up to nearly US$100/brl. Analysts expect to see a tighter oil market in 2008 on account of uncertainties revolving the oil market and crude oil productions growth rate. The mid east economies have been diversifying fast into other non-oil based industries, like infrastructure, Banking and Finance, entertainment cum logistics and aviation hub.

Developing Asian equities are stated to have P/E ratios of 15.2x and 13.8x in 2008-09. As half of the emerging markets are developing Asian economies, global investors tend to diversify into these markets. On earnings outlook, Asia-ex Japan equity funds having a P/E ratio of 16.7x is expected to grow by 15.7% and 11% in 2008-09 respectively. But, with appreciation of Asian currencies like SGD, Indian Rupee and Thai baht, it is hurting the export competitiveness of these countries. The good point to note is that these countries have stronger balance sheet and healthy forex reserves in contrast to the last Asian Financial Crisis in 1997-98. Economies that are heavy producers of electronics products, for example, Korea, Taiwan, China, Singapore, Thailand and Hong Kong that produce semiconductor chips and digital appliances are likely to be hit by a US slowdown. On event of the subprime impact, the ‘4 Asian Tigers’ are expected to slow down by 4.5 % in 2008, although Emerging Asia is likely to grow by 9.2% and 8.3% in 2008-08. Domestic spending, infrastructure boom and intra-Asian trade is expected to keep up the pace of economic expansion in the event of a more volatile and bumpy year for investors.

Sources:
Fundsupermart.com, Bloomberg.com, Investopedia.com

Right Horizons Research Desk

What 10 Things to look out for in 2008?

2008-01-17T10:29:00.000+05:30

Year 2007 had a lot of upswings and downturns that will go down the history. In a best effort to look forward, we seek 10 things to look for in 2008. Predictions are not easy to make, and our views might change with situations. One need not take it seriously just for the sake of predictions and how the financial markets will perform or events that might be in place in 2008, we provide our 10 best predictions to happen in 2008. We did not include political events and others into consideration:

1) Fed will cut more rate to cushion the markets from a liquidity pressure, interest rates may be down to 3.25%. With this, Central banks globally will follow the trend and will cut rates

2)Gold and its cousin silver to see the uptrend. For the first time in history, gold to reach quadruple figure of $1000 and above, and will remain volatile with swinging as wide as $50 intraday

3)After Subprime, it time for the credit card along with consumer bubble to burst that would have a far reaching impact on the financial systems. Emerging markets will probably see the opposite trend- credit and consumer boom

4)Higher energy cost will bear down on household income. Oil to touch $100 and higher sometime in 2008

5)Citigroup to be in more trouble, with its stock price to be affected and more subprime write-downs in the line. Banking and retail sectors to remain under pressure. Rebound in the financial sectors is likely late Q'08

6)More Banking defaults, lawsuits and bailouts to come around since more subprime loans to be written down, and one is still not clear how much exposures do these banks have.

7)Inflation will be a concern in both the emerging markets and the US, particularly in China, Vietnam, India, Brazil

8)Commodities to ride high and one is to look for corn, wheat, maize, potato and soybean. Wheat, having multiple utilities is the best gauze for inflation, and demand for bio fuels will shoot up prices of corn which is one of the ingredients. China will reign as the largest producer of potato. Meat prices likely to go up in purview of shortages

9)Markets to remain highly volatile. Severe corrections are overdue in Emerging markets, but markets to produce above historical average despite some big corrections. One should target better alphas and mitigate Beta risks as far as possible-more diversification. Valuations will matter and P/E ratios could be the key. China bubble to burst after the Olympics, but will rebound

10)US to taste a recession and the dollar after a short rebound to go down further and depreciate 9% more, as also housing to roll down and reach the bottom line.

Right Horizons Desk.

Excerpts and adapted from '10 best of 2008', Seeking Alpha.com

Global Markets Asset Returns-Don't let the volatility overshoot you!

2008-01-16T10:17:00.000+05:30

Analysis on the emerging market asset returns shows off sparkling figures and interesting features for the last 5-6 years. We all know how commodities are having a Spanish bull run for the last 5 consecutive years at a stretch, and how oil prices skyrocketed within a span of a year. And that's what odds for a surprise last year when the Subprime hit the market. The kind of hype subprime got, it seems like something's new has hit the markets, and most analysts were wary about how the subprime is performing! It has been a better within a worst last here, as many things are to be remembered, lest the subprime woes which investors do no like to face again this year. But odds may always win!

REIT's have defied the gravity for seven years till 2006 and lost -17% in 2007. Emerging markets assets performed better than the developed ones in terms of return, but have been more volatile however. Analysts have a view that bond markets will do better this year as investors are more concerned about the performances of high beta-asset classes-the emerging markets. But there are some structural long-term reasons for emerging market bullishness since developed market assets tends to be less attractive to international investors. The data shows how each of the asset classes performed within the last six years or so, and some correlations could be drawn on that bases. Emerging markets bond returns were highest in 2000, 'o3 and '06 when it gave 12.8%, 24.3% and 24.7% respectively. Emerging markets bond returned less in 2002 and '07 with 8.8% and 6.3%. US stocks returned a hopping 31.1% in 2003 after recovering from the dot com bubble bust, as they performed negative in 2000, '01 and '02. In contrast, emerging market stock returns were 51.6% in 2003, the highest till now, and subsequently gave 22.5% in '04, 30.5% in '05, 29.2% in '06 and 36.5% last year, according to Bloomberg. We notice that EM stocks performed remarkably for the last six years subsequently.

US bonds did better during the dot.com bust, with a return of 11.6% in 2000, 8.4% in'01, 10.3% in '02, that's 10% on average for three cumulative years. Data published by Bloomberg shows yields started falling from 2003, when it returned 4.1%, and 4.3% in '04, 2.5% in '05, 4.3% in '06 and rebounded to 7% in 2007. The only asset class that gave consistent returns along with EM stocks and commodities is the REIT sector, till it lost 17% in 2007. From this analysis and keeping in mind the subprime spill over, we can expect US stocks returns to rebound in 2008 at around 10-14% and commodities 14-18% as expected. REIT returns for the last 8 years have been around 20%, and we hope a re-bound in the REIT's sector this year. It is also true that assets that have performed their best till date are sometimes seen to lag in future. But the fear of a credit slowdown and US economic recession looms high on the horizons as analysts predict high volatility and uncertainty in 2008. Those who can hold their nerve and take a patient approach are likely to benefit, and there may be very few out there to reap out some real profit from this falling markets. The question of question is, where is the next best asset class? Where to diversify and mitigate market risks? And how fixed income is going to perform this year and should US slip into a recession, how the markets would react?

Continued next post....

Right Horizons Desk

Sources:Bloomberg, Thompsons

Dollar a big faller; Oil to roil and boil! And US & Japan ‘Submerging markets??’

2008-01-15T09:58:00.000+05:30

Source:Bloomberg & Moneyweek

Equity markets globally have turned highly volatile due to various factors that are often causing panic selling among investors. Falling dollar, volatile oil and bullion markets and surge in commodities prices have created opportunistic trading options for the investors, but in-turn might have increased market volatility. Alternate bouts of buying and selling have seen some indexes shooting high and crashing low in recent episodes. With fears of a US recession and continuous credit market worries, we have seen an upfront in risk aversion entailing demand in risk mitigation products. Emerging markets are trying their best to insulate themselves from a likely possible US downturn and the ongoing turmoil in the US economy fueled by subprime have affected domestic proceedings in some emerging markets, like India, China. And even after some market swinging, fundamental valuations do not appear to be cheap where investors might take some shelter. Year 2007 has seen the triumph of emerging markets over developed markets. In other words, we can say developed markets have nearly 'submerged' under the EM performances in the last few years. One data (above pic) from Bloomberg compiled by moneyweek.com shows the EM performances in 2007; In this scenario, one would ask ‘How well the emerging markets perform?’ Is it an indication of submerging economies bowing to high growth emerging markets? Do US investors need more international diversifications of their assets? What asset classes are the market gems? Where will the oil go and how about the commodities?

Commodities.

Gold. Yes, it’s a ‘gold rush’ again, but not in California this time. It’s a financial instrument based on bullion markets, the Gold exchange traded fund. With gold prices expected to touch US$950-1000/ounce this year due to falling US dollar, it’s a rush hour again for gold. One can invest in gold funds, G-ETFs, or simply buy gold. Gold is considered as a ‘safe haven’ for investors due to the weakening US economy and world currency (US$). Bullish trend is likely to continue this year on the back-drop of a weakening US$ and some investors see it as a good hedging instrument. The same story goes for Silver too, where ongoing weakness, high oil prices and fear of US slowdown is pushing silver prices higher. Platinum is also expected to do well within this parameter’s. Thus, one can interpret that gold and its cousin, Silver is moving on the unit track.

In the Indian scenario the Sebi has come up with liberalized platform for developing the onshore derivatives market in line with the increasing liquidity chasing the stock markets. Mini- contracts on the equity indexes and short-selling in mutual funds are likely to get a nod from the Sebi this year. Also, options on futures and bond indices, volatility trading, forex F&O and ETF products are already in the line. And with the REIT s to hit the market, may be next year or so, their will be more diversification options and financial instruments to trade upon. While FII’s are awaiting more clarifications from Sebi on PN notes and avenues to invest in India growth story, its likely that more money will be chasing the Indian hot stocks which the companies have good dividend payment track records, high growth story and better fundamentals. Indian markets are among few other emerging markets which are trading at a premium. Though till Nov.23, FII’s were the net sellers of Indian equities-Rs.173.40 crore, we saw buying spree by the domestic mutual funds and fund houses who, apart from their domestic exposure are looking for tie-ups with their foreign peers for raising offshore funds In 2007, sectors that performed well are the FMCG, Oil & Gas, PSU stocks among few. There is a tremendous growth prospect for the Indian banking industry which has been foraying for overseas expansion. Strategic planning of Indian banks to expand overseas and get business out of there is likely to drive in for some consolidations in the banking industry.

Japan has been a dismal performer in terms of equity market returns, with Nikkie-225 falling 11% in 2007, as against 5 year bull run. Sustaining deflation and Yen appreciation with falling asset prices and real estate dry-up did match the US subprime debacle and fear of a recession, as US economy might really face one such stagflation situation same as what Japan has been through. Though US and Japan, being the world's largest and second largest economy might see some rebound as market downturns can bring down valuation levels within purview, according to some analysts.

With growing demand for Brent and crude oil from China, India, Brazil and other fast growing economies, it seems that oil will boil and roil the markets, and any supply constraint could see the oil spiraling above US$110-120 in 2008, if oil price fails to moderate early this year, or if the dollar weakens further, say by another 5-7%.

Bull Market Run up- Go for International Diversification

2008-01-14T11:47:00.001+05:30

An average bull run usually lasts for about 3.5 yrs, which has been the trend in the global financial markets for the last five decades, only breaching this time when it crossed the 4th year mark, according to Investech Research. The breaking of this trend might give unusual opportunities to investors hitherto unknown, since last year was marred by subprime crisis pulling down markets globally. Investors, now more savvy and risk averse are looking for further diversifications to mitigate investment risks while targeting more returns out of their investments. According to some experts, the US stocks could rise 20-25% on the sixth year, as already battered stocks could reveal lower valuation levels due to their prolong exposure to subprime effect.

It was revealed that performances of dividend paying stocks fared better from their counterparts, the non-dividend paying ones for the last 10 years. And these dividend paying stocks are from companies which have a strong growth prospect, are already market leaders, and do counteract worst downturns in the stock markets. Investors in the US have already started diversifying their investment options into these emerging markets stocks and elsewhere the opportunities leveraged for. Year 2007 was been indeed a tough year for homebuilders, mortgage lenders and bankers in the US. And with falling US dollars and rising oil prices, it has made the situation worst. If one is to apportion her allocation out of a bundle of investment theories, she needs to look down the lane what happened last year, and what would be it like this year. Gold has been one such example, and with chance of dollar falling further, bullion markets may ride high, with gold price expected to touch US$1000/ounce (28.9 gms) in 2008.

International diversification of stocks is a better option in purview that the global infrastructure boom have already molded in shape, and is likely to be around a US$100 trillion industry, with modernizing world's waterpower resources and transportation to cost around US$40 trillion alone. Thus, there might be some profits from this infrastructure boom too. China, India and Africa are in the hotbed of infrastructure development, with other countries following the track. Global steel prices rose on this backdrop, and are likely to peak up in 2008 due to demand supply constraint. And, not to forget the natural resources industry that has already shown promising returns and a good prospect. The other one to look for is the non-cyclical industry that has consistently performed well in 2007 and is likely to do well this year, particularly in China and India.

Right Horizons Desk

Rising oil price taking Commodities for a ride!

2008-01-11T14:44:00.000+05:30

Rising oil price creating a global oil shock which is trading near $100/brl has been a much concern to the policy makers as benchmark prices for oil rose in all the major exchanges-West Texas Intermediate and the Nymex. Depreciating US$ has been much implicated as the cause of rising oil price besides other factors. High oil prices is also said to be affecting trade balances of some economies. The likely events driving oil price high are:

supply constraints
decreasing inventories in the US and elsewhere
lower OPEC's spare oil production capacity
Oil production shutdowns in some refineries due to bad weather conditions, hurricanes, typhoons
Middle-east crisis
Rising demand from EM's like China, India and non-co adjustability with effective supply trend(supply-shock)
Decrease in Global oil exploration activities
Lower output growth in oil producing countries

With decreasing inventories of oil in OECD countries and increased demand has created supply-demand imbalances in the oil sector. And with rising oil prices there have been a surge in non-fuel commodities prices since last year. Falling dollar contributed further to the problem as import costs rose considerably increasing the import bill. We have seen volatility in food and energy prices that contributed substantially to the equity market volatility in the EMs. Though there has not been any major effect of rising oil prices on the emerging economies till now, a continuous trend might prove otherwise in 2008. It is assumed that low-income oil importing countries and other small emerging nations might face the brunt with higher fuel costs affecting household budget.

Along with oil, we have seen commodities price bubble in 2007 which is not likely to moderate till Q2'08. Metal prices have also increased with Gold being one such, touching $850/ounce last year on the backdrop of a falling dollar. Other metals like lead and nickel have increased and steel prices touched new high in 2007. Growing food shortages in China propelled inflation to a record high of 7.1%, as pig meat shortages have been implicated as a cause of food price inflation. Wheat, Soya bean, milk and palm oil also rose with other food items like meat. As a result, this commodity price boom now has been favored as an alternative investment option or an alternative investment asset class.

Sources:Bloomberg, IMF, Rueters.

Financial Independence for Women:"How women stand out today in respect to Financial & Investment Planning?

2008-01-08T12:16:00.000+05:30

Women today plays a greater and ever increasing role in the society, be it within a family, or as an executive, a business women, working professional, a mother or a wife. With these, they also face a multitude of risks, whether financial or emotional. The need for being a financially more independent is the call of the day, and one cannot ignore the financial contingencies that women faces today in a more dynamically challenged society. And with this comes the requirements of sound financial planning taking into account the various risks that a women faces and hence, starting a step by step investment and financial planning is an absolute necessity. India, now shedding her age old traditions due to more economic and social liberalizations is going through fast transition into a more developed and responsible society.

The question is-How women stand out today? What are their needs and monetary requirements? How secure are they financially and emotionally and what are the financial risks they face?

In India, usually a daughter's marriage costs more than that of a son, and even after a successful marriage, there remains a chance of the marriage breaking up in the early years. The partially separated or divorced woman has to face serious financial contingencies if the back-up support is not adequate, or the family derived assets are not enough to meet the requirements. It even becomes more complex if the women have a child, and still wants to stay independent from her family, father, brother or her maiden house. It is on this context that a sound financial planning to become independent is required.

The Risks that women face in India are multitude:

Financial and social insecurity
Emotional risks due to lack of properly financing the cost of bieng independent, if not employed
Family squabble and separation
Medical & Health Risks
Child Support and Child education
Unequal Asset/Wealth Distribution
Lack of proper Insurance support
Asset Imbalance
Old age support

So what would a woman do to mitigate these risks? Simply start thinking about owning more and knowing what to do with her assets, money and other wealth, whether derived or earned and also 'Understanding' how to create wealth and increase her own financial strength. Women are playing more dynamic role in the society by taking brave, independent decisions to support their plans. But it is also true that they are less aware of increasing their wealth through various options available to men, like trading and market participation, as depicted by Mr. Anil Rego, CEO, Right Horizons. It’s unfortunate that dependent women, even today needs approvals for any proposed expenses that they might have planned for. And to fulfill these monetary or other requirements, every woman needs to have a safe-haven of 'wealth-basket'. Working women have become more independent in their choice of living standard and family planning, but how they fare in financial planning? Do they still rely on their spouse for investment decisions? Certainly, they have every right to ask 'what their money is doing and how much did it do?'

It seems they still follow the same age old traditional methods of saving into fixed-income low-yielding instruments. But there are various instruments that yield high dividends and have higher earnings possibility out there, like corporate bonds and others. So why not take a break? Do you know that owning a real estate can mitigate, empower and strengthen mental and financial security more than anything else? But real estates, though appreciates in value, are highly illiquid, and so, in time of urgent need, one needs to have more money in hand and into highly liquid assets like liquid mutual funds, FDs/CDs, gold or gold funds and even securities investments that are somewhat liquid and of course, some cash.

To see out that works out and the asset allocations read more of this……..below

Mumbai Dreams for a Shanghai Ride!

2008-01-07T11:56:00.000+05:30

Mumbai is a safer city for women to live in !
Behold, one single incident cannot be derived to say that Mumbai is not safe. The ugly face of Mumbai’s social morality toward women has taken shape when two NRI girls were molested by a mob on New Year’s Eve. Policy makers long boasted the idea of developing Mumbai as a Financial Center on the lines of Shanghai, lest the dark side that Mumbai they brought out. Shanghai has been considered a model to follow the footsteps of Chinese capitalism by Indian policy makers who think that one day, Mumbai will look very much like what Shanghai looks today. Indeed Mumbai is the financial center in India and it needs rapid infrastructure developments and civic ammenities to boost its image as an IFC in the South Asian Region. But being forefront of molestation is not the agenda for a better Mumbai! Most of the financial houses and the wealth of India are concentrated in Mumbai, but the crumbling infrastructure the recent incidents have marred the image yet again what Mumbaikar’s would have expected to compete somewhere near with Shanghai.

Shanghai
Mumbai
Shanghai
Shanghai Maglev

It is true that Shanghai scores better in every respect than Mumbai except the film industry. Shanghai also has the world’s first commercial Maglev operation, running nearly at a speed of 450km/hr on a 21 km stretch connecting the Pudong airport to the city. Recent developments in Shanghai have been tremendous with Pudong BD and commercial district being carved out off land reclamed from the sea. The Pudong skyline by Whangpou river is also one of the most beautiful glittering night views dazzling on the bund constantly competing with Hong Kong to reign as the Global Financial Center. Shanghai is also the world's busiest port. But Shanghai’s attitude to foreigner’s and desis have been remarkable, friendly and warm, in contrast to what we have noticed in Mumbai. But inspite of all these, Mumbai is a lovable city to live, enjoy the life and the breeze, the glamour world of Bollywood and much more. Mumbai is the commercial and entertainment capital of Asia, an is also one of the world's top 10 centers of commerce in terms of global financial flow, according to wikepedia. But all this efforts needs to be backed up by effective administration, good morality and sensibility. There were in fact some people who even tried to help the NRI girls from within the rowdy mob , showing off a contrasting humanitarian mindset amidst the shameful and barbarian act.

Some Facts comparing Mumbai to Shanghai:

Mumbai --
Pop. 19 million Area 603 sqkm Market Cap US$1.6 trillion (10th largest)
Transport - Suburban Rail, Bus, Auto,
Taxi etc.

Shanghai-- Pop. 16.7 million Area 6119 sqkm (Market Cap) US$2.38 trillion (5th Largest)
Transport-Bus lines,(One of the largest in the world with 1000 lines, Maglev, taxi, Metro .
Source-Wikipedia

In some ways, Shanghai is far ahead of Mumbai and in reality, it might be a difficult target for Mumbai to catch up or even compare itself with a city like Shenzhen or Singapore, lest not Shanghai or Hong Kong. Mumbai needs to score much better in terms of its urban infrastructure, public transport, civic utilities and moral ethics to come in line with Shanghai.

For More about Mumbai Molestation, Read.....

More about Shanghai...........

FII Investments to India- Indian Demand Story!

2008-01-07T11:26:00.000+05:30

With an ever increasing demand for Indian securities, investments through FII’s and sub brokers in Indian equity markets have led to the demand story for investments. India offers better returns than other emerging markets, the Sensex performing well even in the light of high volatility, climbing 57% in 2007. Due to sustained liberalization on the domestic frontier, foreign investors have found Indian markets as favorable choice of their investment destinations, besides China. The number of registered FII’s in India amount to 1,168 and their registered sub accounts around 3,500. Non-debt creating investments have increased which now constitute most of the private capital and FII investments in India, in contrast to debt creating investments in the early 90’s. FII’s have been investing through various overseas derivatives instruments and one such option has been Participatory Notes (PN), which have been under much review by market regulator Sebi. 2008 might see more liberalization of the capital account as an FII policy since more investors have turned to India for better performances, stability and a more mature capital market to invest.

Right Horizons' Desk
Source-Nj Funds

Inflation- A concern for Vietnam!

2008-01-03T11:26:00.000+05:30

Vietnam is one of the fastest growing economies in the Asia-Pacific region, with real GDP growing by 7.5% on average and a 8.5% growth in 2007. After the (CVP) Communist Party of Vietnam’s continuous economic and social reform programs that helped Vietnam to alleviate the poverty level in the country, the official poverty rate fell from 58% to less than 20% within a very short span. After Vietnams’ accession into the WTO and full restoration of diplomatic relation with the US back in 1995, Vietnam has become one of the trading partners of USA. The Vietnamese exports to the US are booming recently and this is a strong indication to the direction Vietnam is moving toward. Rapid rise of Inflation in 2007 hovering around 9% is a troublesome for this new economy which is valued around US$69 bn. Sustained inflation and rising oil prices are a big challenge to Vietnam’s economy, though now more effectively handled by the Vietnamese policy makers. The rising inflation in the emerging nations have been somewhat attributed to three factors besides other, globally-

· Rising food prices
· Crude oil price rise to USD100/brl
· Rise of Steel price globally

It is on this context that Vietnam risks economic sustenance, but analysts are positive about the continuous reforms that the Vietnamese CPV has undertaken. Recent fall in C/A deficit is an welcome sign as well as the growing forex reserves of around US$23 bn (IMF Estimates). The Vietnam Dong is trading around US$/16100 till now. Though the indicators look much positive, yet some factors like the bureaucracy and widespread rampant corruption has beleaguered Vietnam’s political parties image. The corruption perception index scored 2.6 for Vietnam, much less than the Asian average of 4.6, as measured by Transparency International.

Key Risks to the Vietnam Economy:

· US Economic slowdown
· High Inflation rate
· Rampant Bureaucracy and Corruption
· Strong Inflationary Pressure due to High Crude oil price
· Strong Competition from China
· Avian Flu

Key Positive Indicators

· Good Social and Economic Reforms undertaken by CPV
· Strong export growth
· Building of a logistics hub already underway
· No political risks
· Booming Exports
· Fall in C/A deficit
· Lowering down poverty rate
· Access to FTA

From Right Horizons' Desk

For More Read..............

Are We Facing a Recession?

2008-01-02T16:23:00.000+05:30

Global GDP Rate Year 2007 have seen economic expansions globally within all parameters like technology, financial services, IT revolutionand emergence of new smaller economies alongside one of the worst financial crisis to hit the sector, the US led subprime mortgage market collapse.

The New Year 2008 has arrived with new hopes and investment return goals amongst investors who have faced much challenges in the previous year confronted with market volatility and subprime related downturns eroding some of their investment returns. The performances of the global equity markets have been variable among the emerging markets and the US markets. The year 2007 has been marked by financial turmoil’s affecting stock markets globally, reducing returns, increase in interest rates and reserve ratio for banks, crude oil price shock, commodity and inflationary pressures, higher energy costs propelling inflation in China, Vietnam and elsewhere. A look at the global GDP trend gives an idea how economies grew in the last year.

Balancing higher food costs and meat shortage has been quite challenging for the Chinese central bank which raised interest rate thrice last year. In fact, according to Bloomberg,in China, inflation outstripped returns on bank savings prompting people to diversify into stock markets that created bubble and fuelled inflation and asset price rise further with the SCI-300 climbing 133% last year. China also became the largest contributor to global growth (15.6%) surpassing US (15.4%). But it also left Asian markets more vulnerable and prone to a global exports slowdown should the US face one such this year. Analysts have their fingers crossed and thoughts swinging whether we will face a global economic recession exported from the US, or a pseudo-slowdown that would brush close through the coastline. It seems to be that the markets will tend to be more volatile this year as widening credit market losses could swing the balance one way other. Asset allocation and portfolio diversification is going to gain much importance in lieu of market volatility. According to data published, average annual compounded return of American stock markets from 1926-2006 has been around 10%, and it’s the emerging markets that provided much gain and momentum to returns in the last two decades.

Recent account in Bloomberg about manufacturing growth slowing down in the Eurozone suggests that there has been some real concern about a global recession.

Right Horizons Desk.

Singapore's Economy showing signs of weakness

2008-01-02T16:12:00.000+05:30

Singapore’s economy grew by 6.1% in 2nd Q’07 on account of strong manufacturing sector performance and good external demand for semiconductor and hardware equipments. The recent efforts by the Singapore government to restructure Singapore’s economy into a more service driven sector has seen a lot of mega projects going underway, such as the Mega Integrated Entertainment Complex cum resort at the marina bay which will host some casinos and gaming resorts. Analysts forecast a five year GDP growth rate around 4.9- 5% based on external demand for electronics components, low inflation and a strong performing financial sector. Singapore $ has seen a modest appreciation which is trading around 1.52/US$, as against an 8% appreciation the previous year. Singapore’s rapid growth led by strong export and financial sector performance buffered the weaknesses in the electronics sector somewhat diversifying from the core component business activities. FDI flow to Singapore accounted for USD 20 billion in 2005 according to UNCTAD, compared to US$14.8 billion inflows in 2004.

Singapore has no natural resources and the whole city state is highly urbanized with one of the largest industrial base in Asia, the Jurong Industrial hub boasting around more than 3,000 companies and industries in the South East Asian belt. According to one recent poll by the WB and the IFC, Singapore has been voted as the most business friendly economy in the world. The government’ effort to promote the city-state as one of largest financial hub in Asia has met with success and there has a tremendous competition with its peer, Hong Kong, the largest financial hub in Asia ex-Japan. The service sector growth has been impressive with 8.4% y-o-y Q2’07 from 7.3% in last year. Singapore is the world’s 4th largest currency trading center. Singapore’s industrial production rate slowed down a little in electronics manufacturing sector, and effects of a moderating US economy could hurt the export sector further. One of the world’s largest oil refining and logistics centre and the second largest aviation hub in the world, Singapore is trying hard to counteract the global inflationary pressure that affected the city-state’s consumer price index. The electronics sector mainly thrives due to the North American/European orders of chip equipments and semiconductor related components. The government of Singapore has recently announced some tax-relief packages, which some analysts believe would turn government’s budget surplus into a deficit.
There has also been a rise in housing costs in Singapore after a prolonged housing price decline.

Key Risks to Singapore’s Economy:

· Global and US recession could slow down the export demand
· Rising Housing costs
· Inflationary Pressures
· Exchange rate fluctuation
· Weakening Electronics sector
· Lack of natural resources
· Strong competition from neighboring Malaysia and Hong Kong
· Avian Flu

Positive Indicators:

· Strong financial sector performance
· Strategic Location
· Economic diversification
· Sound and corruption free business environment
· Low Inflation
· Improving services sector growth
· Dominating Logistics hub

No entry load for direct MF investment, says Sebi

2008-01-02T15:57:00.000+05:30

Usually, when an investor invests in a MF scheme, a small percentage of the total money invested (called entry load) is deducted by the fund house. This goes into paying the distributor, agent or broker who got the investor into the scheme. Fund houses charge this entry load even if an investor comes into its schemes directly

Read More.........

Scrapping off entry load in mutual funds- Is it justified?

2008-01-02T15:46:00.000+05:30

MUMBAI: Call it the market regulator’s gift to investors if you will. From January 4, investors buying into mutual funds (MF) directly (without going through a distributor, agent or broker) will not have to pay an entry load. Currently, it can be as high as 2.25%.

Read More....

2007-12-28T16:26:00.000+05:30

2007-12-28T16:25:00.000+05:30

Gold predicted to rise further in 2008

2007-12-28T15:17:00.000+05:30

Gold prices could gain further next year as the pressured economic conditions that led to 2007's surges continue into 2008, it has been claimed.This year has seen the weakening dollar, the US subprime mortgage problems and three interest rate reductions help push gold to new highs, says Money Morning.And while these conditions are unlikely to prevail to the same extent in 2008 as they did in 2007, it is similarly unlikely that they will completely ease off, the website states, potentially keeping gold prices on the same upward trend that has been recorded in recent years.

For More Read..............

Asian Stocks Drop

2007-12-28T10:56:00.000+05:30

BSE Sensex opened flat early morning in line with the Asian markets, which was up yesterday. Most of the Asian markets drop, with Nikkei-225 down by 256 points, Hang Seng down by almost 300, Topix by 24 and SGX(Singapore) down by 20 points. Analysts say it might be the effect due the assasination of the former Prime Minister of Pakistan, Benazir Bhutto, who died yesterday. Dow Jones was down by 192 points yesterday from where it recovered and now 43 points up.

Fore More Visit............

Asian Markets Fall After Bhutto's Assasination

2007-12-28T10:53:00.000+05:30

Dec. 28 (Bloomberg) -- Asian stocks fell after Pakistan's former Prime Minister Benazir Bhutto was assassinated and government reports in the U.S. and Japan added to concern growth is slowing in the world's two biggest economies.
Toyota Motor Co. dropped the most in a month and Samsung Electronics Co. slid after U.S. orders for durable goods rose less than forecast. Yamada Denki Co., Japan's largest consumer- electronics retailer, retreated after the nation's inflation accelerated and household spending fell.

Read the whole story.........

What Is a Bond Market?

2007-12-28T10:43:00.000+05:30

Municipal Market

The latest on the municipal marketplace including our exclusive real-time price information and ticker, in-depth market data, a variety of municipal bond indices, and relevant economic indicators. Invaluable tools for the municipal bond investor.See Municipal Market At-A-Glance

Government Market

A comprehensive view of relevant government and federal agency market data. Check out key indices, and important economic indicators. Use this data to guide your government and agency investment strategy.See Government Market At-A-Glance

Corporate Market

Timely data on corporate bonds including our real-time price information and ticker, in-depth market data, key corporate indices, and relevant economic indicators. A serious toolkit for the corporate bond investor.See Corporate Market At-A-Glance

For More Visit..........

2007-12-28T10:42:00.000+05:30

2007-12-28T10:39:00.000+05:30

Pakistan in chaos as Benazir Bhutto assassinated

2007-12-28T09:54:00.000+05:30

Times News

Pakistan was plunged into chaos today after the assassination of Benazir Bhutto, the popular opposition leader, just 13 days before a general election that she was well placed to win.
A suicide bomber shot at Ms Bhutto, 54, and then blew himself up next to her car as she left a rally in Rawalpindi. She was rushed to hospital but declared dead at 6.16pm local time.

Read More.....

Benazir Bhutto-Pakistan's Most Dynamic Lady Assasinated

2007-12-28T09:48:00.000+05:30

Yahoo News 27th Dec 2007

ISLAMABAD, Pakistan - Benazir Bhutto was many things — zealous guardian of her dead father's legacy, aristocratic populist, accused rogue, even one of People magazine's 50 most beautiful people. And in the end, she was a victim of roiling passions in the nation she sought to lead for a third time.

Read More........

China Is Heading Fot IT!

2007-12-27T16:17:00.000+05:30

"China's IT services industry is marching into a golden era within the next five years, capturing an annual revenue of 132 billion yuan by 2010," said Chen Jianjun, deputy secretary general of the China Federation of IT Promotion.

Read More Why....

Tech Sector Outlook: What to expect?

2007-12-27T16:03:00.000+05:30

The BSE Sensex crossed the historic 20k landmark last month as bourses went jubilant with the market performances. Our Sensex is mainly composed of heavy tech component and the share prices of Infosys, Wipro, Reliance jumped to 8-9% higher, from a 2.6% gain of the Infosys share back in May 2nd Q’07. Infosys, being the second most heavy-weighted stock in the Sensex, investors always have a ‘watch-out’ attitude for its performance. The global technology and the telecom sector have been in growth phase and as such, we are bullish on the tech and telecom sector in the long term perspective, though short term hitches downgraded the tech/IT sector outlook in India as per our previous recommendations.

Our bearish view on tech sector comes on the light of US nad global slowdown in exports and on the face of further rupee appreciation in Q1'08. We have followed the trend in the BSE, and back in June 2007 when it was trading around 14700 mark, there was a resistance level of 16,000, which it crossed in early August. Our forecast for the Q1’08-Q2’08 is bearish, less the subprime crisis and we expect the market to breach the resistance level of 21700 and look beyond 24000 in 3rd Q’08. And we expect the banking and finance and the infrastructure sector to perform better in the later half of FY’08. We also hope that some new techies with their IPO’s will be hitting the market onward 1st Q’08.

Right Horizons' Research

Tech Sector Outlook: What to expect?

2007-12-27T15:58:00.000+05:30

Are IT stocks still the gold rush?

A strong rupee adversely impacts the profits of IT companies (they earn less rupees against every dollar earned) and may affect their sales targets.Market analysts believe if the rupee continues to rule strong, IT companies will be forced to revisit the guidance they had given for the next quarter (first half 2007-08).

Fore More Read.....

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2007-12-27T14:55:00.000+05:30

The Rise of Private Equity-buy, manage and sell !

2007-12-27T14:54:00.003+05:30

Buy, manage and sell: the current motto of the private equity industry. Well, the private equity firms are in their buying spree and have been foraying far out from their land of origin to the high growth emerging markets, mostly spanning the Indo-Sino-Pacific region and the BRICS nations. Private equities (PE) and their cousins, Venture capitals (VC) are targeting the highest returns on their investments through their funding schemes to the needy corporate sectors and start-up entrepreneurs. Private Equities are mainly providing growth capitals and buyout capitals, which means they are infusing liquidity, taking over the management, turning around the company and then selling it off. Usually PE investments in companies are locked in for about 4-5 years before their exit. There are various exit strategies for Private Equities.

Private Equities generally scan the capital markets to identify sectors and companies within those sectors who might be the likely target. This also depends upon a countrie's high economic growth rate with buoyant corporate activities as well as it's macroeconomic stability. Emerging markets offer unparallel opportunities to seek growth and better returns on investments. According to some reports, India offers around 19% for RoI, as compared to 15% in China and 13% in Thailand, among some of the high growth economies. It is this growth story that has been attracting the PE players to invest in these countries. There are in-effect, different nature of operations of an Indian corporate with relation to the West where PE players borrow heavily to finance buyouts and leverage for acquisitions, whereas in India, corporate usually invest their own money rather than investors and shareholders, though the situation is changing fast at present. We have noticed several mega deals of M&A activities where Indian companies have borrowed from the overseas capital markets as -'dollar denominated debts'. Sectors prone to private equity scanners are the software, BPO, Telecom and the recent sprout in Biotech activities.

Private equity’s activity spans from providing the necessary capital to takeover of the management activities of a firm. Added advantages garnered are acquiring the cash flows the particular firm. On this context, PE players also present themselves as management service providers, while holding a major stake in the firm’s equity. They maximize their value through leveraging and other options. As a promoter company, PE players often own stakes in group companies also. Their portfolio investments in group companies are managed by their own corporate managers or in-house management teams. Average holding period for most private equity firms spans from 3-4 years to 6 years, and within this period they turn the entity into a profitable firm and chalk out there exit strategy either through sell off, spin off or M&A.

The private equity activity in India currently is around $13 billion industry and is likely to grow by 15% annually, according to Bloomberg.

For More...........

Thailand-Renewed Growth Prospects

2007-12-27T14:54:00.001+05:30

Economic growth hovered around 5% in 2007, that’s quite flat on account of political instability prevailing in Thailand since Prime Minister Thaksin Sinawatra was overthrown. Though economy is expected to pick up in 2008 after containing the political solution to recent problems, the growth is expected on the ground that Thailand will be having a renewed investment and consumption demand from early next quarter. BoT (Bank of Thailand) reduced interest rates by 175 bps in 3rd Q’07 to stimulate the economy, but that did not work out. Another cut by 25 bps brought the interest rate to 3.25 %. Our year end interest rate forecasts around 3.0% or in 1st or 2nd Q’08. Rate cuts are being targeted against the deflating economy and falling asset prices, which is necessary to bring about a revival in consumption or investment growth.

Being an export dependent economy, export growth is expected to moderate or even slow down to 7.0-7.1% y-o-y 2007, if the political turmoil is not taken care off. The Thai Baht climbed 10% against the $, hurting exports and bringing down industrial competitiveness for Thailand within the ASEAN community. Trade surpluses in 2007 and renewed interest in equities (SET) and stock markets might help keep the Thai Baht strong within this quarter. Some economic recovery is expected in Q1’08 after political restructuring and reshaping the Thai politics will surely boost both consumption, investment and tourism sector revival even though tourism was least affected by the recent turmoil. Thailand has a trade surplus of around $12.84 bn, which was up from a $266bn deficit in April 2007 to a surplus of US$650 mn in May 2007. Inflation remained low till date, around 1.9%, and domestic demand is slowing down, sowing a deflationary seed. FDI rose to around US$10.46 billion, which is a good sign if the economy needs to boot up. We expect the Thai Baht to hang around THB 33-34/$ till Q2nd 2008 and the only risk to the currency this time is political.

Key Risks to Thai Economy:

· Political Instability
· Deflationary Pressure
· Export Slowdown
· US Economic Slowdown
· Sudden Capital Flight & Currency Devaluation on the political context

Positive Indicators:

· Trade Surplus
· Appreciating Baht
· Low Inflation Scenario
· Renewed Interest in Equity Markets
· Robust FDI Inflow

For More Visit......

2007-12-27T14:51:00.004+05:30

2007-12-27T14:51:00.003+05:30

Containing the global credit crunch in order to prevent liquidity dry up has been the main object of the capital market regulators in the US and elsewhere, whereas in the emerging markets, the opposing trend prevailed. Rising inflationary pressure, buoyant liquidity, large capital inflows from FII’s, triggered monetary stabilizing to curb inflation and absorb excess in the system liquidity that has been the priority of the central bankers and market regulators. Within these purview, we have seen the remarkable performances of the emerging market stocks. Though the equity markets continued to be volatile, yet they returned spectacular performances with the Chinese and Indian shares rising by 85% and 40% respectively. In fact the Indian BSE Sensex and the Shanghai SCI 300 have seen one of there best performances as both bourses went up record level. So here we are in the stock market boom in the emerging markets. Compared to the developed markets, emerging stock market performance has been better than their counterparts. Year to date gain in S&P 500 is only 4.66%, the London FTSE-100 rose only 3.4% and the Tokyo Nikkei dropped around 12%. Current return from the Indian equities have been around impressive 16%-18%, indicating the volatile trend the Sensex went through. The Morgan Stanley Capital International-Emerging Markets (MSCI-EM) rose 33.24% in 2007, showing an impressive emerging market growth trend.

Fore More visit......

2007-12-27T14:51:00.001+05:30

China- Overheated Ready to Burst?

2007-12-27T14:50:00.003+05:30

China is racing with rapid economic growth due to its surging exports and robust growth in investments. China’s real GDP soared to a 12 year high of 11.9%, that accelerated from11.1% in Q1’07.Recent increase in Chinese private consumption growth has been fuelling both the economy and the already overheated stock market-the Shanghai SCI-300, that soared 168% this year. This has brought in renewed concerns about stock market bubble burst that might prove dangerous for the Chinese economy. Beijing has been confronted with twin problem, one to cool down the economic growth without dampening investor sentiment, and get hold of the bubbling stock and asset price hike that is fuelling inflation at record high 6.9% in 9 year history. This ongoing inflation problem in China prompted authorities PboC(People’s Bank of China) to increase interest rates thrice, now 7.25%, which is justified.

China’s inflation has been driven by high food prices and a shortage of pigs. China’s red hot economy is also adding to the price pressure and a chance of inflation spiking up higher cannot be ruled out in Q1’08. It’s a big challenge for an economy of this scale to sustain the current growth rate, though well supported by a strong growth in industrial output and buoyant money supply. It is also feared that China might be exporting the inflation too, but a data shows that this might not happen as China’s food export constitute only 3% of its total export. Government officials has sought regulation of food prices to tame the inflation from becoming a troubled one(runaway inflation). Without drastic moves from Beijing, it is unlikely that it could have much impact on the current scenario, so slowdown is unlikely as per our forecast. It is also true that China being a mojor exporter to the US, an US economic slowdown would hurt the Chinese export substantially. Also, China has to counteract ‘Made In China’-at stake and raise its product safety level as a result of toxic chemicals found in Chinese export, that have been reported to have killed several people and animals in Mexico and some other elsewhere. Beijing’s challenge in product safety calls for a swift action, though Chinese officials have taken drastic steps to counteract this problem.

Key Risks to Chinese Economy:

· Overactive policy moves to cool the economy
· Shanghai stock market bubble burst
· US slowdown
· High Unemployment rate
· Concerns about working conditions
· Quality Control of Chinese export.

Positive Indicators:

· Rapid and prompt action from the Beijing authorities in addressing quality issues
· Cautious and calculated approach to cool the economy
· Development of inland based component business activity
· Bustling business activity and investment growth
· Increased consumerism
· Beijing Olympics

Fore More Visit Xinhua......

2007-12-27T14:49:00.001+05:30

Emerging Market Economies: Overall Outlook

2007-12-27T14:48:00.000+05:30

1.

Emerging markets usually carry additional risks due to various unstable parameters like political uncertainty, currency and economic risks, besides being prone to natural disasters that affect the countries more than what would happen in the same scale in developed markets. Yet, they provide the maximum diversification and multiple opportunities along with prospective upside to return on investments. Emerging markets are generally less correlated to the developed markets and as such, they are a good ground for portfolio diversifications. But when liquidity and capitals are changing domains and funds are getting transferred back and forth within minutes from the developed to the emerging markets, emerging markets are finding it difficult to decouple fully from the developed markets. Moreover, any uncertainty about geopolitical and economic events gets correlated quickly with the emerging markets. The equity market performances of the EMs are being tracked every moment and some major indices have been created to measure as such, the MSCI-EM, comprising of 26 nations under Morgan Stanley’s purview. The MSCI-EM that tracks EM’s, rose 33.24% in 2007 indicating growth prospects and and better investment returns from these markets in the near term. Though volatility plays it part, new free trade inititive within the ASEAN and South Asian nations will boost the emerging markets in the coming years.

Market Rides High and Held Firm!

2007-12-27T14:47:00.001+05:30

Thursday, 27 December

4:54 PM - The market closed in the positive, held firmly above 20000 for the Sensex and 6000 for the Nifty on F&O expiry today. Sensex closed at 20216, up 24 points and Nifty at 6081, up 10 points from the previous close.The CNX Midcaps Index was up 0.3% and BSE Smallcaps Index was up 2.3%. The market breadth was strong with advances at 766 against declines of 454 on the NSE.

Fore More,Visit........

Where is the US strong Dollar Policy?

2007-12-20T10:18:00.000+05:30

On the global currency frontier, continued weakening of the US dollar against the major traded currencies like euro, pound, Canadian dollar and the yen has been creating much debate among currency strategists whether to let the US dollar find its own ground or to mediate. Analysts, according to Bloomberg, also have a view that if the ‘Greenback’ is allowed to fall too rapidly then investors would dumb the dollar backed assets. In-fact the dollar has depreciated much to the extent of 10% against some currencies i.e., the euro and the Indian Rupee, as recently noted by Asia-Pacific Head, Mark Mathews of Merrill Lynch. The emerging market currencies also appreciated considerably on account of huge capital inflows and the rise in demand for their domestic assets and currencies from overseas investors. With the ever increasing importance of Renminbi (Yuan) as a major Asian currency, the US dollar seems to have been taking a back seat.

The Japanese Yen's appreciation against the US$ (trading at 113.10/$) has seen unwinding of the carry trades, where one usually borrow cheap and invest in higher yielding assets. China is contemplating that the continued fall of the US dollar is eroding their asset holding valuations in the US, and are now being highly pressurized to devalue the Yuan, which has gained around 12% against the dollar since it got unpegged, thus creating a huge trade deficit with the US. According to China, US should manage its own 'house' rather than sniffing on the Chinese kitchen'. China has also questioned about the unsustaining US strong dollar policy, and about the continued fall in dollar that is causing oil price and commodity price rise.

It seems that the $ is loosing its glare since it's continued fall, as the Euro has been favored as an alternative in the international forex/import-export market, since more traders seems to be moving to Euro as their currency of choice. And on the same frontier, the US has nearly failed in her strong dollar policy, according to global anlaysts and reports published in Bloomberg and others. However, currency strategists have a view that since the US is still the largest market for investments, operating business and the biggest export market for the emerging economies, this is a short term depreciation as dollar may roll back once the financial markets become more stable.

The "Fed Cover"-Is the Fed always a last resort?

2007-12-20T10:09:00.000+05:30

The reactions in the global equity markets due to the Fed's 50 bps rate cut on 18th August and 25bps cut subsequently in late September 18th were appealing to both the investor community as well as to the financial institutions across the world. Investment bankers, credit originators as well as lenders sought relief from the credit squeeze that soon followed the US sub prime debacle. Apart from the rate cut, Central Bankers pumped in huge money ($350 billion) into the system to temporarily tackle and contain the credit crunch thus providing more liquidity to the capital markets. 'Escape from Sub prime' has been one of the most sought after policy of some major lenders, bankers and NBFC's who have substantial exposure to the US subprime market collapse. It is on this context that analysts as well as the policy makers have been much worried about an US economic slowdown, since housing market collapse in the US might lead to a full blown economic downturn due to co-related consumer expenditures. More housing starts and home sales mean more household goods per capita consumption, more people buying household appliances, accessories and others. While less credit in the system spells doom both for the auto industry which thrives on car loans based on easy credits as well as home loan originations that boost the housing and real estate markets.

Investors, anticipating US market trouble have sought shelter elsewhere where they have been parking their money in the Emerging Markets that has been consistently showing remarkable and sustained growth prospect. Though the market shake-off due to the US impact did pull down the emerging equity markets, the strong export driven fast paced developing nations are in-fact in their finest economic tunes since the last Asian Financial crisis in 1997.Quite equally the remarkable economic expansion and financial reforms undertaken by two of the world's most fastest developing nations-China and India boasting 8- 10% on average GDP growth rate. Analysts feel much of the ill-effects due to the subprime crisis could be well cushioned by emerging Asian nations. Consumer demand and expenditure are quite high on account of the newfound wealth in these countries, with the others joining the bandwagon, particularly Russia, Brazil, South Africa, India, China (BRICS), Hong Kong, South Korea and Taipei . The other Asian countries like Thailand, Malaysia, Singapore and Indonesia, (ASEAN) nations have been performing well within their macroeconomic parameters.

Analyst might have had a view that the growing Asian economy might buffer any major US downturn, but since US still remains the major importer from these countries, and being the world's largest economy (US$13.5 trillion), followed by Japan (US$4.5 trillion) which has been into a ‘deflationary stagflation’ phase since the late 90's, concerns about export slowdown to these major partners lingering amongst the market participants. A further credit market tightening could jeopardize the corporate mega deals and stall major expansion programs. Fund raising may be hit hard if investor sentiments are towed down with increased risk aversion. Few investors would like to lose money and in-fact is likely to seek better investment returns when the markets are performing well. Foreign investments into equity markets have increased considerably in the emerging markets where good corporate growth and higher returns are attracting global investors pouring liquidity into the stock markets. These factors have created in-effect, asset price rise and stock market bubbles in several countries like China and India. Markets are reacting to any global clues, either from the Fed, major Central Banks or the political changes affecting monetary and economic policies of such countries.

Subprime Impact on the Global Capital Markets

2007-12-20T09:29:00.000+05:30

It’s time again for the US policy makers for another economic recovery program, on the aftermath of the financial crisis triggered by the Subprime mortgage market collapse. The Fed, Central Banks and the Bush administration are up in arms to contain the current housing market crisis which spread like a contagion effect across the global capital markets. As a lender of last resort, the Fed (Ben Bernanke) has proved itself (himself) credible enough in tackling the current crisis, according to analysts, though it cost the Central Banks around $350 billion to buffer the credit squeeze as a result of the subprime effect. The lenders, the borrowers and the credit originators might have learnt lesson well from the current financial turmoil that wiped out $2.5 trillion from the global equity markets. One could wonder how 'uncle sam' -the US economy, by far still the largest with $ 13.5 trillion economy could really come out of this trouble, as the subprime is not yet over and the banks and lenders exposure's to such is much under purview. Global investment banks and NBFC's have been reporting mounting losses tagged to subprime bonds (MBS-mortgage backed securities) traded in the US and elsewhere which investors have started dumping due to high default rates.

It has now been one of the prime agenda of the Bush administration as how to tackle the current subprime mess as well as safeguarding the borrowers’ interests. In fact, US have been through several economic crises before in the last three decades well backed up by ambitious recovery programs. One such has been during Ronald Reagan’s tenure, when, the situation was not far off-better than the current subprime. It was during the 1981 the US economy was facing a tough challenge with Inflation rate as high as 12% and unemployment rate around 7.2%. The present scenario doesn't look the same since the nature of financial crisis has changed with the times. US Inflation is now within the Fed's comfort zone-2% and unemployment rate well contained. The few options Reagan had at that time were cutting government spending, managing federal deficit, cuts in domestic spending and income taxes. Perhaps, Bush might have fewer options at present as the USA is confronted with huge trade deficits with China, much larger defense budgeting, falling dollar,likelihood of an economic slowdown, along with the falling housing prices and rising home loan foreclosures.

It was USA's credit boom during 2003 under Fed Governor Alan Greenspans regime, that resulted in housing boom due to the prevailing low interest rate scenario. People borrowed and lenders lent on low credit score to those who didn't even qualify for housing loans. Subprime loan originations were on record pace in early 2003-04 which were based on unique amortization schedules like ARM, Interest Only,(I/O) etc. Underscoring borrowers creditworythiness to dispatch loans based on easy credit spelt doom for the subprime sector when borrowers started defaulting as soon as the ARM(Adjustable rate morgages) rates were readjusted in 2005. Loan foreclosures and defaults brought down the ratings on the MBS(Mortgage Backed Securities) based on subprimes, and by then, investors started dumping these high risk bonds. Many banks and NBFC's bought these high risk bonds as their portfolios which were traded in the markets. Institutions like Hedge Funds also bought these MBS bonds heavily and the reason that they are very much exposed to this subprime led market downturns.

One likely option could be opening of an outright 'subprime-only exchange' where the remaining ABS-MBS bonds could be traded freely among the investors after re-pricing those loans. Subprime bonds could be sold in 'auctions' as it might open a creative channel to diversify the default risks of the borrowers. However it might be, financial statecraft should be sound in dealing with a crisis of this magnitude, which due to its contagion effects might spread the infection and make it more pandemic in the financial markets.

One might say, "never put an actor on stage before the show starts’’; while it is equally true to "put a stage before the actor performs". As with the financial markets, it is not immune and the stage should always be there to put down the right man at the right time as markets have become more interdependent and highly integrated in nature, albeit -more 'sensual'.

References: Bloomberg, Reuters’s, Economic Times
Books: Reagan, God and the Bomb- F H Knelman

Markets recover from initial blues

2007-11-02T18:14:00.002+05:30

MUMBAI: The market opened sharply lower on Friday pressured by weak global cues, but was fast to recover from lows.
At 10 am, the National Stock Exchange's Nifty was down 55 points or 0.93 per cent at 5811.85. The 50-share index was off the low of 5714.25, a loss of 152.2 points from Thursday.
Bombay Stock Exchange's Sensex was 170 points or 0.86 per cent lower at 19,554.69, off the low of 19,255.77—a fall of 468.58 points from the previous close.

Indian kitchens turning into a hub for cuisine tourism

2007-11-02T18:14:00.001+05:30

AHMEDABAD: It is not just about epicureans alone. If the world is itching to gorge on exquisite Indian cuisine, the Indian kitchen is turning into a hub for cuisine tourism across the sub-continent.
Taking a cue from the Singhs of Marwar who threw open their family kitchen at Rohet Garh palace near Jodhpur to showcase the traditional Rajasthani cuisine to foreign tourists a decade back, families across India are seeing business in their traditional kitchens.

Salary hike losing sheen, T&D's the key to retain staff

2007-11-02T18:12:00.000+05:30

NEW DELHI: Education and retention go hand in hand. That's what companies across Asia Pacific are discovering. As many as 64% of employers in the region are investing in training and development as an incentive to retain staff as compared to only 27% of employers using base salary increase as a strategy to retain employees. Non-cash incentives such as customer service awards were used by 43% followed by annual cash incentive by 34% of the employers, says a Mercer study on Total Rewards in the Asia Pacific region.

Was Fed rate cut forced by markets?

2007-11-02T18:11:00.000+05:30

As expected, the US Federal Reserve Bank lowered the Fed funds rate (the indicative rate in the overnight inter-bank market) by 25 basis points to 4.5%. It also lowered the discount rate at which it lends to banks by an identical 25 basis points to 5%. The moves, which were in line with market expectations, sent oil prices to a new high of $96 to a barrel and gold to a 28-year high of close to $ 800 an ounce even as the outlook for the US dollar turned uncertain.

Companies scouting for Japanese & German translators

2007-11-02T18:10:00.000+05:30

PUNE: Koennen Sie Deutsch? (do you know German). Nihongoga Dekimasuka? (do you know Japanese). Because, if you do, agencies involved in translation work are scouting for talent. The languages business is the next outsourcing business, driven by two separate trends. First, national governments are keen to promote the teaching of their languages in other countries, notably the Japanese.
The other trend is driven by legislation, where in countries such as the UK, it is mandatory to issue public awareness documents in specified languages. These include five Indian languages — Hindi, Urdu, Bengali, Gujarati and Punjabi. And this has to be done by ‘in country native speaker’ of the language. So, it has to come to India.

Banks may cut credit on recovery discredit

2007-11-02T18:08:00.000+05:30

NEW DELHI: Taking bankers to task on dubious loan recovery methods might just prove counter-productive, with some bankers considering a freeze on lending to segments that throw up maximum defaults.
Should the bankers be penalised for recovery, they would have to make a trade-off between discontinuing their services to some segments against bearing the risk of wilful defaulters who could misuse a legislation to their advantage. Banks factor in a certain minimum number of defaults despite stringent recovery procedures. They fear the defaults could go up in case recovery processes are not tight any more.

It's Cub League

2007-11-02T18:06:00.000+05:30

Living under the shadows of India’s much lionised IT giants, Infosys, TCS and Wipro can be tough. For companies outside this club, there’s the constant pressure of being compared with the Big Three. HCL Technologies, Satyam, and Cognizant have now breached the $1 billion revenue mark — but they’re still considered to be in the cub league.
There’s constant speculation about Satyam and HCL being taken over by larger firms and apprehensions about Cognizant’s ability to sustain its breakneck growth. While HCL’s restructuring act in 2005 and 2006 was considered a move aimed at sprucing up the balance sheet for a potential selloff , Ramalinga Raju, CEO of Satyam, had to forcefully deny rumours that the company was a takeover target for IBM in an analysts conference.

Pre-launch booking fetches handsome returns

2007-11-02T18:05:00.000+05:30

It is a growing phenomenon and while in the best-case scenario works as a win-win situation for the buyer and developer, due the inherent risk involved, pre-launch bookings have now started attracting the attention of regulatory authorities.
Pre-launch booking refers to the practice where a developer accepts money from potential flat buyers before the formal launch of the project – sometimes even before getting the necessary approvals and commencement certificates.

Managing market risk step by step

2007-11-02T18:04:00.000+05:30

Banks are exposed to rising levels and complexity of risks. As banks grapple with implementing an effective risk management framework we take this opportunity to demystify market risk management compliance in line with the RBI guidelines.
Bank of International Settlements (BIS) defines market risk as the risk that the value of ‘on’ or ‘off’ balance sheet positions will be adversely affected by movements in equity and interest rate markets, currency exchange rates and commodity prices. However, just knowing what constitutes market risk is of little value unless we are able to appropriately quantify it and maintain adequate capital provisions for it.

Sale of single-premium policies takes a hit

2007-11-02T18:02:00.000+05:30

KOLKATA/MUMBAI: Despite the phenomenal surge in the Sensex in recent times, sale of single-premium life insurance products, including unit-linked policies (Ulips), has dipped to abysmally low levels.
This has pulled down the overall first premium income (FPI) growth numbers for the entire industry which recorded a tiny 12% growth during the first half of 2007-08 against a phenomenal 162% jump in the first six months of 2006-07.

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Banks’ Plan to Help May Itself Need Help

2007-10-19T10:50:00.000+05:30

Does the rescue plan for the credit markets need to be saved?

The plan is still being developed, but the roughly $75 billion effort to snap up troubled securities is struggling to get off the ground, days after it was disclosed by the country’s three biggest banks with the support of the Treasury Department.

Reliance Communication gets govt nod for GSM service

2007-10-19T10:36:00.000+05:30

MUMBAI: Reliance Communications said on Friday said it had obtained government approval to launch GSM services.
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Oil futures touch USD 90 a barrel

2007-10-19T10:17:00.000+05:30

Oil prices surged past USD 90 a barrel for the first time on Thursday, as the fall in the USD Dollar drew new foreign investors and speculators to Dollar-denominated energy futures. Buying by foreign investors sends prices up, drawing in more speculators into the market.

How to Inflation-Proof Your Portfolio

2007-10-19T10:06:00.000+05:30

Can you guess which bond category is leading the pack this year? If you said "inflation protected," you would be correct. For the third quarter, this category turned in a 4.06% return. For the year to date, it is up 5.34%. Although some of you may think bonds are boring, they can play an important role in your portfolio.

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PN, Gain: Long-term derivatives in works

2007-10-19T10:00:00.000+05:30

NEW DELHI: Long-term derivative products may soon make a debut in the Indian capital markets. Having imposed restrictions on fresh investments through participatory notes (PNs), the government is now working with market regulator Sebi to identify new instruments like long-term derivatives to attract investors through the regulated route.

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Market rally was confined to select stocks: North Block

2007-10-19T09:43:00.000+05:30

NEW DELHI: An internal study by the finance ministry has found that there were no surveillance or regulatory problems when the Bombay Stock Exchange (BSE) benchmark index touched new highs recently.

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When bad returns don't make a bad fund

2007-10-18T13:34:00.000+05:30

Good managers can look lousy when the sector they invest in is out of fashion. But fashions change.

Profit-booking by FIIs to hit small, mid-cap firms

2007-10-18T13:13:00.000+05:30

Large-cap stocks such as Reliance Industries, IDFC and Infosys among others account for bulk of the FII incremental investment in the last three months. Between June and September this year, FIIs are estimated to have bought additional stake worth Rs 3,800 crore in these three companies.

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London shares gain again, paced by miners Sage shares down after U.S. chief leaves firm, Cookson to buy Foseco

2007-10-11T15:39:00.000+05:30

LONDON (MarketWatch) - Miners helped the top London share index to gain ground again on Thursday, with the index in the green for the fifth time out of seven trading sessions.

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Dodging the mortgage bullet

2007-10-11T15:27:00.000+05:30

(Fortune Magazine) -- The credit crunch has many holders of bank and brokerage stocks quaking in their boots. But Chuck Lahr, manager of Franklin Templeton's Mutual Financial Services fund, isn't one of the worriers. Four years ago Lahr began shifting money out of U.S. financial services and into European financial stocks, which held up better in the recent turmoil.

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Liquidity gush & Re may trigger CRR hike

2007-10-11T15:13:00.000+05:30

The sudden surfeit of liquidity into the banking system, accompanied by a rising rupee, may leave RBI with very little options, but to announce a hike in the cash reserve ratio (CRR) in the near-term. The only difference this time around is that bankers expect the central bank to resume paying interest on cash reserves placed with it.

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Incomes have risen, so has inequality: IMF

2007-10-11T14:35:00.000+05:30

WASHINGTON: Income inequality has increased in most countries during the past two decades as incomes have jumped amid a more recent spurt in world growth, according to an IMF report Wednesday.
The International Monetary Fund made the comments in portions released from its global economic outlook ahead of the IMF and the World Bank autumn meetings scheduled for October 20-21.

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RBI calls for curbs on PN, PE inflows

2007-10-11T14:33:00.000+05:30

NEW DELHI: The surge in capital inflows over the past few weeks, especially through the portfolio route, has prompted the central bank to move to discourage such flows.

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Citi asks Genpact to match Firstsource bid

2007-10-11T14:30:00.000+05:30

MUMBAI: Citigroup has asked Genpact to match the higher bid put in by Firstsource Solutions for its captive BPO operations. The two players were in the final round of the race for Citigroup’s BPO, Citigroup Global Services, that was put up for sale earlier this year. Genpact was tipped as the favourite, but in the final round, Firstsource bid higher than Genpact, sources close to the development said. Citi now wants Genpact to match the Firstsource offer, they added.

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Inside out: Indian BPOs ring in strategy to counter rupee rise

2007-10-11T14:21:00.000+05:30

CHENNAI: Indian business process outsourcing firms have long looked outside the country for their markets, and inside for their delivery centres. Now, as the rupee strengthens against the dollar, some BPOs have started looking — ever more seriously — at two strategies. For one, they are trying to locate more delivery centres abroad to serve those markets. And second, they are trying to win more business from the domestic market.

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Infosys Q2 net profit up 4.47% QoQ, 18.4% YoY

2007-10-11T14:19:00.000+05:30

MUMBAI: Infosys Technologies Ltd has reported a consolidated net profit of Rs 1,100 crore for July-September, up 1.9 per cent from Rs 1,079 crore in the quarter ended June 30.
Net sales on consolidated basis stood at Rs 4,106 crore in the second quarter, up 8.8 per cent from Rs 3,773 crore from the immediate quarter.

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Om Shanti Om & Saawariya kick off record marketing blitz

2007-10-11T14:18:00.000+05:30

NEW DELHI: The two most hyped films of the year—Shah Rukh Khan starrer Om Shanti Om and Sanjay Leela Bhansali’s Saawariya—have begun cracking records a month before their blockbuster Diwali releases.
With both films set for a November 9 release, their respective marketing machineries are in full swing to bring in revenues and recover budgets, which are learnt to have crossed over Rs 35 crore each.

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India Inc scorching stock market with new records

2007-10-11T14:15:00.000+05:30

NEW DELHI: IT’S not just the stock market which is on an all time high. India Inc is also scorching deal street with new records. The total value of equity deals—including strategic mergers & acquisitions (M&A) and private equity (PE)—in the first nine months of the 2007 has crossed the $60-billion mark.

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Govt approves oil bonds worth $5.97 bn

2007-10-11T14:14:00.000+05:30

NEW DELHI: Cabinet on Thursday approved the issue of oil bonds worth $5.97 billion to state-run oil firms to compensate them for selling fuel at below market prices in the financial year 2007/08, Oil Secretary M S Srinivasan said.

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ICICI Securities connects US mkt via trading portal

2007-10-09T10:57:00.000+05:30

MUMBAI: Indian investors can now own global blue chip stocks thanks to ICICIDirect.com launching overseas trading in tie-up with USA's fourth largest clearing and broker-dealer firm, Penson Financial Services.
ICICIDirect.com on Monday became the first online trading portal in India to offer buying and selling of equities listed on the US stock market following RBI's guideline allowing individuals to remit up to $200,000 annually in current and capital account transactions including equities.

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Reliance Power, Emaar IPOs may drive next phase of rally

2007-10-09T10:55:00.000+05:30

The stock market rally has left investors gasping for breath. When the market is in an uncertain territory like this, opinion always gets sharply divided on whether the new levels are sustainable or not. With the secondary market in a quandary, the primary market may just be the one to show the way.
The reason being some large, and significant public issues like Reliance Power, Emaar MGF, Edelweiss and Wockhardt Hospital are ready to enter the market. If they get lapped up by investors without denting the secondary market, then the market may just get the vote of confidence they are looking. Among the lot, Reliance Power and Emaar are the two most important issues.

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India Inc queues up for general purpose loans

2007-10-09T10:54:00.002+05:30

MUMBAI: Bankers are spotting a sudden interest among corporates for ‘general purpose loans’. They sense a large part of this money is finding its way to the stock market.
Senior bankers told ET that RBI has recently voiced its discomfort over the disbursal of loans for which corporates do not have to specify the end use. A general purpose loan is like an unsecured clean loan which was introduced in the mid-’90s to make borrowing easier for corporates.

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Accenture, Wipro eye Dell’s non-US BPO business

2007-10-09T10:54:00.001+05:30

BANGALORE: IT services majors Accenture and Wipro have evinced interest in acquiring Dell’s captive BPO business outside of the US. The world’s second-largest PC maker has put its contact centres across India, Philippines, El Salvador and Canada on the block with a valuation estimated to be around $4 billion, multiple sources familiar with the situation said.
While both Wipro and Accenture declined comment, Dell denied it was putting its non-US BPO services on the block.

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India offers opportunities for long-term investors

2007-10-09T10:52:00.000+05:30

In the past 10 months global investment firm Legatum Capital has invested around $3 billion in the Indian market. Unlike other portfolio investors, Legatum has been investing the personal wealth of Christopher Chandler in markets across Japan to the US.
Till last year, the New Zealand-based Chandler brothers — Richard and Christopher Chandler — under Sovereign Global were investing in India through Crown Capital, a Sebi-registered FII sub-account. They started investing in the Indian market from 2005. After the split between the

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Meltdown in second-line stocks hits retail investors

2007-10-09T10:51:00.000+05:30

MUMBAI: It was a setback for retail investors on Monday. Fresh political concerns caught investors on the wrong foot, as benchmark indices succumbed to sustained selling pressure on Monday.
The BSE mid-cap and small-cap indices, in fact, underperformed the broader market, ending 3.7% and 3.3% down, respectively, against the Sensex’s fall of 1.6% on Monday. The sharp fall was also reflected in the index representing the SME segment.

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Investors go liquid to beat volatility

2007-10-09T10:50:00.001+05:30

MUMBAI: The mood in the stock market may be euphoric, but money collected through new equity scheme offerings from mutual funds does not reflect that. So far in 2007, new equity schemes have collected Rs 20,166.15 crore, which is lower than Rs 24,239 crore collected in 2006. On the other hand, rising interest rates have made liquid funds and liquid-plus funds attractive to investors. Both these categories invest in securities with short maturities, and hence are able to give better yields.

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Govt should consider 'golden share' in PSU banks: SBI

2007-10-08T12:32:00.000+05:30

NEW DELHI: The government should consider having a 'golden share' to retain control over the public sector banks while allowing them to raise capital through a restructuring plan, State Bank of India Chairman O P Bhatt has said.
The public sector banks could lose out totally to foreign or private banks in meeting the fast increasing capital needs of the corporate world, particularly for the mergers and acquisition, unless the nationalised banks are equipped to augment their capital, Bhatt told reporters in interview making a strong case for greater financial empowerment for the nationalised banks to compete effectively.

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